Endogenizing prospect theory's reference point

Ulrich Schmidt and Horst Zank

No 1611, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This note provides a foundation of prospect theory, where reference-dependence is derived from preference conditions and a unique reference point arises endogenously.

Keywords: Prospect theory; reference point; diminishing sensitivity; loss aversion (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1611

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