Endogenizing prospect theory's reference point

Research, Preprint English OPEN
Schmidt, Ulrich ; Zank, Horst (2010)
  • Publisher: Kiel Institute for the World Economy (IfW) Kiel
  • Subject: Prospect theory | Prospect theory, reference point, diminishing sensitivity, loss aversion | diminishing sensitivity | 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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