References Points in Decision Making



Reference Points in Decision Making

Introduction

Reference Point is generally defined as a stimulus in relation to which other stimuli are also seen. Reference points play an essential role in creating a reference point on the basis of which a decision maker makes his decision. It has been researched that reference points have a great impact on the decision making processes and outcomes of the individuals. The decision making processes vary from individual to individual and similarly each decision is influenced by a different reference point (Fitzgerald, 2002). There are various factors that influence the reference points on the basis of which a decision is made.

Factors that Influence the Reference Point of Decision Making

It is researched that reference points play a vital role in the process of decision making an individual goes through. A reference point serves as the basis of the decision made by an individual. There are three different types of reference points which are categorized as:

Aspiration Level Reference Points - These are the reference points that represent the created targets for a particular attribute.

Market Level Reference Points - These are the reference points that are based on the perceptions of attributes prevailing in the environment.

Historical Level Reference Points - These are the reference points that are influenced by the past experiences of the individuals.

These different types of reference points influence the decision of the decision maker. Furthermore, the reference points of the decision maker are also influenced by various factors that are very important to be discussed. It has been discovered by different researches that there are various factors which influence the reference points on the basis of which an individual makes his decision (Doya, 2008). Some of the most important and essential factors are discussed in the following paragraph.

Some of the most important ...