A Theory Of Reference-Dependent Beavior

Jose Apesteguia and Miguel Ballester

No 402, Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra from Departamento de Economía - Universidad Pública de Navarra

Abstract: There is extensive field and experimental evidence in a wide variety of environments showing that behavior depends on a reference point. This paper provides an axiomatic characterization for such behavior. Our approach is dual, we study choice behavior and preference relations. We proceed by gradually imposing more structure on behavior, requiring higher levels of rationality, that free the decision-maker from certain types of manipulations. Depending on the phenomena one wants to model, one degree of behavioral structure will be appropriate or another. We provide two applications of the theory: one to model the status-quo bias, and another to model addictive behavior.

Keywords: Individual rationality; reference-dependence; rationalization; path-independence; menu-independence; status-quo bias; addiction; habit formation. (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-02
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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 behavior (2007)
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