The same outcome can feel different depending on the reference point used to judge gains and losses.
Theoretical modelA model for explaining behavior, not a direct test of this interface’s conversion effects.
Example
A fictional monthly fee of ¥3,000 can look different against a current fee of ¥2,000 or a budget of ¥5,000.
Why it works
Prospect theory describes risky choice using gains and losses relative to a reference point and decision weights. Reference dependence and loss aversion are related but distinct.
On the web
Ask about current costs and required features first. Identify whose reference point is being used and align the product, period and conditions in a price comparison.
When it backfires
Reference points vary and can be hard to observe. A seller’s high reference price need not become the user’s reference point; the model alone does not predict web conversion gains.
Sources
Proposes a model of risky choice based on gains, losses and decision weights.
Kahneman & Tversky (1979). Prospect Theory: An Analysis of Decision under Risk. Open source
Extends reference-dependent preferences to riskless consumer choice.
Tversky & Kahneman (1991). Loss Aversion in Riskless Choice: A Reference-Dependent Model. Open source