Expectations-Based Reference-Dependence and Choice Under Risk

Bibliographic Data

ID9718241
AuthorsDavid Freeman (0000-0001-6146-8940, corresponding author), David J Freeman (0009-0004-0860-114X, Department of Economics Simon Fraser University)
Year2019
Volume129
Issue622
Pages2424-2458
Publication date2019-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12639
OpenAlexW2888616395
LanguageEN
Citations received1
References cited39

This article characterises the behavioural content of a model of choice under risk with reference-dependent preferences and endogenous expectations-based reference points based on the preferred personal equilibrium model of Kőszegi and Rabin (2006). The combination of reference-dependent preferences and endogenous reference points leads to violations of the Independence Axiom and can also lead to violations of the Weak Axiom of Revealed Preference. An axiomatic characterisation shows that the model places testable restrictions on choice under risk

Axiom · Axiom independence · Econometrics · Economics · Expected utility hypothesis · Independence (probability theory · Mathematical economics · Microeconomics · Preference · Prospect theory · Revealed preference · Risk neutral · Statistics · Decision-Making and Behavioral Economics · Economic and Environmental Valuation · Experimental Behavioral Economics Studies · Mathematics

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