A theory of reference-dependent behavior

Jose Apesteguia and Miguel Ballester

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Extensive field and experimental evidence in a variety of environments show that behavior depends on a reference point. This paper provides an axiomatic characterization of this dependence. We proceed by imposing gradually more structure on both choice correspondences and preference relations, requiring increasingly higher levels of rationality, and freeing the decision-maker from certain types of inconsistencies. The appropriate degree of behavioral structure will depend on the phenomenon that is to be modeled. Lastly, we provide two applications of our work: one to model the status-quo bias, and another to model addictive behavior.

Keywords: Individual rationality; reference-dependence; rationalization; path independence; status-quo bias; addiction; habit formation; LeeX (search for similar items in EconPapers)
JEL-codes: A12 B41 D11 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-hpe, nep-ict and nep-upt
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: A Theory of Reference-Dependent Behavior (2015)
Journal Article: A theory of reference-dependent behavior (2009)
Working Paper: A Theory Of Reference-Dependent Beavior (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1056

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