Local Status and Prospect Theory

Rick Harbaugh () and Tatiana Kornienko

Claremont Colleges Working Papers from Claremont Colleges

Abstract: People are sometimes risk-averse in gains but risk-loving in losses. Such behavior and other anomalies underlying prospect theory arise from a model of local status maximization in which consumers compare their wealth with other consumers of similar wealth. This social explanation shares key features with the psychological explanation o.ered by Kahneman and Tversky.

Keywords: prospect theory; status; reference group; loss aversion; risk loving (search for similar items in EconPapers)
JEL-codes: D81 D11 (search for similar items in EconPapers)
Date: Written
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Persistent link: http://EconPapers.repec.org/RePEc:clm:clmeco:2000-38

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