A Revealed Reference Point for Prospect TheoryCitation formats

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A Revealed Reference Point for Prospect Theory. / Werner, Katarzyna M. ; Zank, Horst.

In: Economic Theory, Vol. 67, 13.01.2018, p. 1-43.

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Werner, Katarzyna M. ; Zank, Horst. / A Revealed Reference Point for Prospect Theory. In: Economic Theory. 2018 ; Vol. 67. pp. 1-43.

Bibtex

@article{9ec064958b744eb3bb2e80a9a44ebcda,
title = "A Revealed Reference Point for Prospect Theory",
abstract = "Without an instrument to identify the reference point, prospect theory includes a degree of freedom that makes the model difficult to falsify. To address this issue, we propose a foundation for prospect theory that advances existing approaches with three innovations. First, the reference point is not known a priori; if preferences are reference-dependent, the reference point is revealed from behavior. Second, the key preference axiom is formulated as a consistency property for attitudes toward probabilities; it entails both a revealed preference test for reference-dependence and a tool suitable for empirical measurement. Third, minimal assumptions are imposed for outcomes, thereby extending the model to general settings. By incorporating these three features we deliver general foundations for prospect theory that show how reference points can be identified and how the model can be falsified.",
keywords = "Probability midpoint, Prospect theory, Rank-dependence, Reference point, Sign-dependence",
author = "Werner, {Katarzyna M.} and Horst Zank",
note = "Publisher Copyright: {\textcopyright} 2018 The Author(s) Copyright: Copyright 2018 Elsevier B.V., All rights reserved.",
year = "2018",
month = jan,
day = "13",
doi = "10.1007/s00199-017-1096-2",
language = "English",
volume = "67",
pages = "1--43",
journal = "Economic Theory",
issn = "0938-2259",
publisher = "Springer Nature",

}

RIS

TY - JOUR

T1 - A Revealed Reference Point for Prospect Theory

AU - Werner, Katarzyna M.

AU - Zank, Horst

N1 - Publisher Copyright: © 2018 The Author(s) Copyright: Copyright 2018 Elsevier B.V., All rights reserved.

PY - 2018/1/13

Y1 - 2018/1/13

N2 - Without an instrument to identify the reference point, prospect theory includes a degree of freedom that makes the model difficult to falsify. To address this issue, we propose a foundation for prospect theory that advances existing approaches with three innovations. First, the reference point is not known a priori; if preferences are reference-dependent, the reference point is revealed from behavior. Second, the key preference axiom is formulated as a consistency property for attitudes toward probabilities; it entails both a revealed preference test for reference-dependence and a tool suitable for empirical measurement. Third, minimal assumptions are imposed for outcomes, thereby extending the model to general settings. By incorporating these three features we deliver general foundations for prospect theory that show how reference points can be identified and how the model can be falsified.

AB - Without an instrument to identify the reference point, prospect theory includes a degree of freedom that makes the model difficult to falsify. To address this issue, we propose a foundation for prospect theory that advances existing approaches with three innovations. First, the reference point is not known a priori; if preferences are reference-dependent, the reference point is revealed from behavior. Second, the key preference axiom is formulated as a consistency property for attitudes toward probabilities; it entails both a revealed preference test for reference-dependence and a tool suitable for empirical measurement. Third, minimal assumptions are imposed for outcomes, thereby extending the model to general settings. By incorporating these three features we deliver general foundations for prospect theory that show how reference points can be identified and how the model can be falsified.

KW - Probability midpoint

KW - Prospect theory

KW - Rank-dependence

KW - Reference point

KW - Sign-dependence

U2 - 10.1007/s00199-017-1096-2

DO - 10.1007/s00199-017-1096-2

M3 - Article

VL - 67

SP - 1

EP - 43

JO - Economic Theory

JF - Economic Theory

SN - 0938-2259

ER -