Modeling loss aversion effect on sales-service relationship in the transportation industry

The primary objective of this research is to investigate the relationship between sales and service quality in the transportation industry. A model of sales-service relationship is developed and estimated using airline passenger data. The study utilizes two elements of customer utility that appear to have important potential for enhancing the theoretical and predictive quality of sales-service models in the transportation area: reference dependence and loss aversion. The study results show that the model incorporating the reference dependence and loss aversion effects outperforms the existing sales-service models in both fit and forecasting accuracy.