The Study On The Effect Of The Reference Points Effect And The Cognitive Style To The Economic Decision

Kahnema and Tversky thought that before an individual made a decision, he would not base on the absolute value that is brought by various decision but on the deflected direction and level of their mental reference points to the actual amount of profit and loss of decision, which means the reference points will set the mode of some given result as their profits or loss, which will have effect on their process of decision. This study will select 300 college students of grade two and three as its participants. And the study will focus on the effect of the reference points to the economic decision from three respects of reference dependence, loss aversion and diminishing sensitivity. It will use the mixed experimental design and aim at the consumption and investment Furthermore, the study also divides the participants into two groups of both field dependence and field independence according to Witkin's theory of cognitive style. From this point, the study has analyzed their differences of economic decision under the influence of reference points. The conclusion is as follows:(1) The reference dependence has the effect on both of the consumption and investment decision. The participants of different cognitive style will be different only in the study of reference dependence of the investment decision. In the research of consumption decision, the participants will set lower price toward the loss level, and vice versa. In the study of investment decision, the participants will choose the high risk and high income investment in reference to the loss level, while they will choose the conservative investment of low risk and low income. In the study of the influence of the reference dependence to the decision, the cognitive style has not significant presentation on consumption decision. On the contrary, the cognitive style has played an obvious effect on the investment decision. The participants of field dependence will choose the high risk investment portfolio while those of field independence will reflect in the opposite way. This difference in reference to loss levels appeare to be significant.(2) Both of the consumption and investment are influenced by the loss aversion and different cognitive style participant will have different presentation due to the loss aversion. The influence of the loss aversion to the consumption decision are reflected in the much higher price for the loss aversion of the transferor that beyond the customer's expectation. The influence of loss aversion to the investment decision are reflected on the preference reversal, which means the diminishing sensitivity of the participant. Different participants of different cognitive style will have different presentation in the experiments of the loss aversion, while the participants of field dependence are more stronger reacion to a certain extent than those of field independence.(3) The differences of the effects on the decision of consumption and investment caused by the diminishing sensitivity. In the study of consumption decision, neither diminishing sensitivity nor cognitive style had a significant effect. In the study of investment decision, there are significant impact on the decision results for diminishing sensitivity. With the increase of income and reference point distance, people are willing to pay for less investment because of more and more small returns. Different participants of different cognitive will have different presentation in the experiments of the diminishing sensitivity. Field dependence participant away from thereference point of the decision result lower sensitivity, while the participants of field dependence are stronger influence than those of field independence.