The firms in this model set non-binding list prices before competing for buyers by non-cooperatively granting discounts. Each firm has an incentive to set a high list price if, for example, the customers anchor their willingness-to-pay on the list price. However, list price competition occurs if...

We exploit administrative data on exact commuting distances for a large sample of German employees and study the relation of commuting and wages. We find that it requires 1.5 times as much money in terms of higher wages for job changers to accept an increase of their commute as compared to their...

We conduct a laboratory experiment to explore whether loss aversion applies to social image concerns. First, subjects are ranked publicly in a social image relevant domain, an IQ test, to establish own rank as a within-subject reference point. We then induce an exogenous change in within-subject...

In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This paper provides an axiomatization of a new specification of cumulative prospect theory, termed endogenous prospect...