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Ordered Reference Dependent Choice

Xi Zhi Lim

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Abstract: We study how violations of structural assumptions like expected utility and exponential discounting can be connected to reference dependent preferences with set-dependent reference points, even if behavior conforms with these assumptions when the reference is fixed. An axiomatic framework jointly and systematically relaxes general rationality (WARP) and structural assumptions to capture reference dependence across domains. It gives rise to a linear order that determines references points, which in turn determines the preference parameters for a choice problem. This allows us to study risk, time, and social preferences collectively, where seemingly independent anomalies are interconnected through the lens of reference-dependent choice.

Date: 2021-05, Revised 2021-09
New Economics Papers: this item is included in nep-dcm and nep-upt
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