AbstractThis article examines the effect of disappointment aversion on the equilibrium in a commodity futures market. Consider a commodity market with a producer and a speculator. We show that the equilibrium price is positively related to either agent's risk or disappointment aversion, and to the market volatility. The market trading volume is positively related to the producer's risk or disappointment aversion, but negatively related to the speculator's risk or disappointment aversion. The producer lowers his or her reference point in response to an increase in the risk aversion or disappointment aversion of either agent, and to an increase in spot price volatility. The speculator raises his or her reference point when the producer becomes more risk averse or disappointment averse, or when the spot price becomes more volatile. A more disappointment‐averse speculator will lower his or her reference point. However, a more risk‐averse speculator raises (lowers) the reference point if he or she is less (more) risk averse than the producer. Numerical examples are provided to further support the above analytical results. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:135–150, 2003