Impact Of Reference Points Research Articles

A Review of Researches on the Influence of Reference Points on Newsvendor Behavior Decision

This article reviews the related literature on the impact of reference points on newsvendor behavior decision-making, including two parts: related research on reference effects and research on newsvendor behavior decision-making. Research shows that decision makers are affected by reference points when making decisions, such as status quo (SQ), minimum requirement (MR), and goal (G). At the same time, in the inventory management scenario, decision biases can occur due to the existence of reference points. In addition, each reference point has different influences on the behavior decision of the newsvendor.

Cross-border transactions, mergers and the inconsistency of international reference points

Reference point theory is a well-established phenomenon in the behavioral economics field (Anchoring Theory). Its broad implications also extend to financial topics. For example, Baker et al. (2012) demonstrate the impact of a range of reference points related to 52-week high stock price on domestic merger and acquisition activity. The anchoring behavioral bias is universal and not limited to the United States. An investigation into the power and impact of reference points in explaining merger and acquisition activity in an international setting is valuable as firms face heterogeneous legal, regulatory, and market conditions. In addition, cross-border mergers change the legal structure of the shares of the target firm. Using the 52-week high share price of the target, this study investigates the impact of increased information asymmetry in estimating synergistic effects.

Understanding the reference effect

This paper explores how a change in a default—specifically, an exogenously given reference point—affects individual preferences. While reference dependence is extensively studied, very little is known regarding the impact of reference points on individual choice behavior when the reference points themselves are not chosen (Reference Effect). We identify critical properties that differentiate between classes of reference-dependent models and test them. We find that the reference effect exists for asymmetrically dominated reference points, but we do not see any evidence of a reference effect for symmetrically dominated reference points. Some of the existing models are mostly consistent with our data but lack predictive power. None of the models offers the particular predictions that our experiment suggests. Finally, we also tease apart the differences between the reference effect and the asymmetric dominance effect (decoy effect), a well-known phenomenon observed in the literature on context-dependent choice.

The use of reference points in valuation judgment

Experiments reported in this paper clarify and extend results of previous research into the impact of reference points on valuation judgment. The value judgments of expert commercial appraisers from the USA who were not familiar with the geographical setting of the subject property were influenced by a variety of reference points. In order of significance of impact, these influential reference points were: the uncompleted contract price of a comparable property; the uncompleted contract price of the subject property; and the value opinions of other experts. This hierarchy of impact is consistent with both the degree to which each reference point is sanctioned by normative US training and the degree to which each reference point is generally available to US experts. Comparison with previous research suggests that market uncertainty as reflected by geographical unfamiliarity has a role in triggering reference point anchoring.