Why we value things more as we are about to lose them: a reference-based theory

A common belief is that we only truly appreciate things or people when we are about to lose them. This phenomenon is often observed in real-world scenarios, such as when people place greater value on a meeting with a friend who is about to leave or in marketing, where consumers are willing to pay more for a flight when only a few tickets remain available. But why does this happen? This paper explores the dynamics behind this behavior, focusing on how subjective value increases as reference standards—considered as expectations about the future availability of events—decrease over time. We introduce a computational model to investigate the relationship between subjective value and the probability of exerting effort to attain an event under varying reference standards. The model demonstrates how deviations from these reference standards influence the perceived value of an event, with the likelihood of exerting effort rising as the perceived value increases relative to alternatives. Through simulations, we explore the psychological and economic implications of reference-dependent valuation, offering insights into how changes in perceived value drive effortful decision-making. The findings shed light on reference-dependent behavior in both everyday and high-stakes decision-making contexts.