Attitudes Towards Success and Failure

Antonio Penta and Larbi Alaoui

No 1336, Working Papers from Barcelona School of Economics

Abstract: Individuals often attach a special meaning to attaining a certain goal, that marks the difference between what they consider a success or a failure. Within a standard von Neumann-Morgenstern Expected Utility setting, with an exogenous reference point that separates success from failure, we deï¬ ne attitudes towards success and failure as features of preferences over lotteries. The distinctive feature of our deï¬ nitions is that they all concern a local reversal of risk attitude, between risk-aversion and risk-lovingness, for lotteries that go across the reference point. Our ï¬ ndings provide a uniï¬ ed view of several models of reference-dependent preferences, as well as novel representations. We order the intensity of each attitude,and characterize these orderings in terms of properties of the utility representations, with indices analogous to the Arrow-Pratt index of risk aversion.

Keywords: Risk Aversion; aspirations; reference-dependence; expected utility; loss aversion (search for similar items in EconPapers)
JEL-codes: D01 D81 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-cbe, nep-mic, nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1336

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