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Revealed (P)Reference Theory

Author

Listed:
  • Efe A. Ok
  • Pietro Ortoleva
  • Gil Riella

Abstract

This paper develops axiomatically a revealed preference theory of reference-dependent choice behavior. Instead of taking the reference for an agent as exogenously given in the description of a choice problem, we suitably relax the Weak Axiom of Revealed Preference to obtain, endogenously, the existence of reference alternatives as well as the structure of choice behavior conditional on those alternatives. We show how this model captures some well-known choice patterns such as the attraction effect. (JEL D11, D81)

Suggested Citation

  • Efe A. Ok & Pietro Ortoleva & Gil Riella, 2015. "Revealed (P)Reference Theory," American Economic Review, American Economic Association, vol. 105(1), pages 299-321, January.
    • Handle: RePEc:aea:aecrev:v:105:y:2015:i:1:p:299-321
    Note: DOI: 10.1257/aer.20111046
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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