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Reference dependent ambiguity

Listed author(s):
  • Mihm, Maximilian
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    Motivated by experimental and empirical evidence, I study a framework where reference-points – such as a status quo, endowment, or default option – can distort the way an individual responds to ambiguity. I characterize a model of reference-dependent maxmin expected utility, and provide behavioral foundations for comparing reference-dependent ambiguity attitudes. I also illustrate some implications of reference-dependent ambiguity for trade in an asset market, including underdiversification, no-trade, and the potential for a market collapse.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053116000272
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 163 (2016)
    Issue (Month): C ()
    Pages: 495-524

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    Handle: RePEc:eee:jetheo:v:163:y:2016:i:c:p:495-524
    DOI: 10.1016/j.jet.2016.02.006
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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