Revisiting reference point formation, gains–losses asymmetry and non‐linear sensitivities with an emphasis on attribute specific treatment

In contrast with expected utility theory, empirical findings indicate that decision‐makers are sensitive to departures from reference points rather than states. Several tests of the reference‐dependent preference framework have been carried out in experimental economics, and to a smaller extent in a choice modelling setting, to date. However, these empirical applications have generally focussed on a single behavioural phenomenon using uniform modelling approaches. This paper aims to broaden existing work by presenting a multi‐attribute framework, allowing contemporarily for gains–losses asymmetry, non‐linearity and testing for several possible reference points. The framework is applied in the context of commuter choices and reveals important gains in model fit and further insights into behaviour compared to standard modelling approaches. Of particular relevance for future research is the functional form of fare sensitivity that varies significantly with the reference point used.