We experimentally test Kőszegi and Rabin's (2006, 2007) theory of reference-dependent preferences in the context of … produce a 'comparison effect', moving WTA in the opposite direction to the forced sale price. Consistent with the theory, we …

We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect … theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility … an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is …

We present a new theory of wage adjustment, based on worker loss aversion. In line with prospect theory, the workers … price. Firms adjust wages flexibly in response to variations in labor demand. The resulting theory of wage adjustment is …