Reference point formation over time: a weighting function approach
Manel Baucells (),
Martin Weber and
No 07-43, Papers from Sonderforschungsbreich 504
Although the concept of reference point dependent preferences has been adopted to almost all fields of behavioral economics, especially marketing and behavioral finance, we still know very little about how decision makers form their reference points given a sequence of prices. Our paper provides both a theoretical framework on reference point formation over time, based on cumulative prospect theory’s s-shaped weighting function, and a new experimental method for eliciting subjects’ individual reference points in a finance context. Consistent with our model, we document our subjects’ reference points to be best described by the first and the last price of the time series, with the equally weighted average and the highest price receiving smaller weights.. Results, however, vary strongly on the individual level and are also affected by the elicitation question applied.
JEL-codes: C91 D14 D81 G11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Working Paper: Reference Point Formation Over Time: A Weighting Function Approach (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2525
Access Statistics for this paper
More papers in Papers from Sonderforschungsbreich 504 Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().