Reference Dependence When Tastes Differ

Research on reference effects typically concentrates on vertically differentiated attributes, but many important consumer decisions involve taste differences (i.e. horizontally differentiated attributes). We use the classic Hotelling model to explore “horizontal” reference dependence, introducing reference effects that are not direction specific. We find that by itself “horizontal” reference dependence doesn’t impact single-period choices in a Hotelling model, but does impact consumers’ strength of preference. Applying this to the context of political marketing, where voter preferences are modeled as horizontal differentiation (left to right), we find that “horizontal” reference dependence can influence primary elections when electability concerns and uncertainty exist.

Citation:

Neil Bendle and Mark Bergen (2009) ,"Reference Dependence When Tastes Differ", in NA - Advances in Consumer Research Volume 36, eds. Ann L. McGill and Sharon Shavitt, Duluth, MN : Association for Consumer Research, Pages: 104-107.