Endogenizing prospect theory's reference point
- Publisher: Kiel Institute for the World Economy (IfW) Kiel
Prospect theory | Prospect theory, reference point, diminishing sensitivity, loss aversion | diminishing sensitivity | reference point | loss aversion | D81
In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This note provides a foundation of prospect theory, where reference-dependence is derived from...