Endogenizing Prospect Theory's Reference Point

Research, Preprint OPEN
Schmidt, Ulrich; Zank, Horst;
  • Publisher: Kiel: Kiel Institute for the World Economy (IfW)
  • Subject: Prospect theory | diminishing sensitivity | Prospect theory, reference point, diminishing sensitivity, loss aversion | reference point | loss aversion | D81
    • ddc: ddc:330
      jel: jel: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... View more
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