The impact of choice difficulty on reference dependence and loss aversion

In many consumer choice situations one alternative serves as a reference point against which the other alternatives are compared. The use of such reference points systematically affects decision making. The reference-dependent model of Tversky and Kahneman explains these effects using three phenomena: reference dependence, loss aversion and diminishing sensitivity. Past research has demonstrated the existence of the reference dependence and loss aversion phenomena. The current research begins the examination of how context moderates reference effects. Specifically, it examines the impact of choice difficulty on reference dependence and loss aversion.; It is hypothesized that choice difficulty will intensify reference effects through an increase in the attentional focus on loss attributes. It also examines a possible explanation for the focus on loss attributes, that they are used to simplify the decision task.; Understanding the impact of choice difficulty on reference effects has both theoretical and practical implications; knowledge of how choice difficulty influences reference effects offers insights into why these phenomena exist and what purpose they serve in the consumer decision process. This knowledge will also help us to predict when reference dependence and loss aversion are likely to impact preferences and attitudes as well as suggest potential ways to influence these effects.; The dissertation involves two experimental studies. The first study demonstrates the main hypothesis at the preference level using a strong reference manipulation. The second study employs a less powerful hypothetical reference manipulation but allows for an examination of the hypothesized processing effects. The results of the second study partially support the hypothesized effects of difficulty and simplication but have some substantial limitations.