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, when consumers are willing to pay more for a flight with only a few tickets remaining. But why does this happen? This paper explores the dynamics behind this behavior, focusing on how subjective value increases as reference standards - understood as expectations about the future availability of valuable events or opportunities - decline over time. We introduce a computational model to investigate how subjective value varies in response to shifting reference standards and uncertainty about them, leading to increased valuation as the expected future availability of events diminishes near a deadline. The model also demonstrates how this rising subjective value increases the likelihood of exerting effort to secure valuable opportunities before they are lost. Through simulations, we examine the psychological and economic implications of reference-dependent valuation. Our simulations show that the simple principle of a declining reference point as a deadline approaches explains shifts in subjective value and effort-based choices, providing a mechanistic account of phenomena previously linked to scarcity, FOMO, and related effects. This novel theory offers a testable, mechanistic explanation for why subjective value and effort-based decisions change over time, shedding light on reference-dependent behavior in both everyday and high-stakes decision-making contexts.