Endogenizing Prospect Theory's Reference Point

Autoren

• Schmidt
• U.
• Zank
• H.

Erscheinungsdatum

JEL Classification

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 preference conditions and a unique reference point arises endogenously.

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