Testing reference dependence, loss aversion and diminishing sensitivity in Spanish tourism

Based on Tversky and Kahneman’s Prospect Theory, we test the existence of reference dependence, loss aversion and diminishing sensitivity in Spanish tourism. To do this, we incorporate the reference-dependent model into a Multinomial Logit Model with Random Parameters -which controls for heterogeneity- and apply it to a sample of vacation choices made by Spaniards. We find that the difference between reference price and actual price is considered to make decisions, confirming that reference dependence exists; that people react more strongly to price increases than to price decreases relative to their reference price, which represents evidence in favor of the loss aversion phenomenon; and that there is diminishing sensitivity for losses only, showing convexity for these negative values.

Students’ understanding of the function-derivative relationship when learning economic concepts

The aim of this study is to characterise students’ understanding of the function-derivative relationship when learning economic concepts. To this end, we use a fuzzy metric (Chang 1968) to identify the development of economic concept understanding that is defined by the function-derivative relationship. The results indicate that the understanding of these economic concepts is linked to students’ capacity to perform conversions and treatments between the algebraic and graphic registers of the function-derivative relationship when extracting the economic meaning of concavity/convexity in graphs of functions using the second derivative.