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Revealed Preference Foundations of Expectations-Based Reference-Dependence

This paper provides revealed preference foundations for a model of expectations based reference-dependence a la Koszegi and Rabin (2006). Novel axioms provide distinguishing features of expectations-based reference-dependence under risk. The analysis completely characterizes the model’s testable implications when expectations are unobservable.

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Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp13-10.

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Length: 51
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:sfu:sfudps:dp13-10
Contact details of provider: Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Phone: (778)782-3508
Fax: (778)782-5944
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Order Information: Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
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  1. David Card & Gordon Dahl, 2009. "Family Violence and Football: The Effect of Unexpected Emotional Cues on Violent Behavior," NBER Working Papers 15497, National Bureau of Economic Research, Inc.
  2. Eliaz, Kfir & Spiegler, Ran, 2012. "Reference Dependence and Labor-Market Fluctuations," CEPR Discussion Papers 8997, C.E.P.R. Discussion Papers.
  3. Botond Kőszegi & Paul Heidhues, 2008. "Competition and Price Variation When Consumers Are Loss Averse," American Economic Review, American Economic Association, vol. 98(4), pages 1245-68, September.
  4. Keith M. Marzilli Ericson & Andreas Fuster, 2011. "Expectations as Endowments: Evidence on Reference-Dependent Preferences from Exchange and Valuation Experiments," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1879-1907.
  5. Abeler, Johannes & Falk, Armin & Götte, Lorenz & Huffman, David, 2011. "Reference Points and Effort Provision," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 358, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Vincent P. Crawford & Juanjuan Meng, 2011. "New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income," American Economic Review, American Economic Association, vol. 101(5), pages 1912-32, August.
  7. Chew, Soo Hong, 1983. "A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox," Econometrica, Econometric Society, vol. 51(4), pages 1065-92, July.
  8. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  9. Karle, Heiko & Peitz, Martin, 2010. "Pricing and Information Disclosure in Markets with Loss-Averse Consumers," CEPR Discussion Papers 7785, C.E.P.R. Discussion Papers.
  10. Crawford, Vincent P. & Meng, Juanjuan, 2008. "New York City Cabdrivers' Labor Supply Revisited: Reference-Dependence Preferences with Rational-Expectations Targets for Hours and Income," University of California at San Diego, Economics Working Paper Series qt94w5n6j9, Department of Economics, UC San Diego.
  11. Masatlioglu, Yusufcan & Ok, Efe A., 2005. "Rational choice with status quo bias," Journal of Economic Theory, Elsevier, vol. 121(1), pages 1-29, March.
  12. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  13. Juan Carlos Carbajal & Jeffrey C. Ely, 2012. "Optimal Contracts for Loss Averse Consumers," Discussion Papers Series 460, School of Economics, University of Queensland, Australia.
  14. Ortoleva, Pietro, 2013. "The price of flexibility: Towards a theory of Thinking Aversion," Journal of Economic Theory, Elsevier, vol. 148(3), pages 903-934.
  15. Au, Pak Hung & Kawai, Keiichi, 2011. "Sequentially Rationalizable Choice with Transitive Rationales," MPRA Paper 29687, University Library of Munich, Germany.
  16. Paola Manzini & Marco Mariotti, 2007. "Sequentially Rationalizable Choice," American Economic Review, American Economic Association, vol. 97(5), pages 1824-1839, December.
  17. Munro, Alistair & Sugden, Robert, 2003. "On the theory of reference-dependent preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 50(4), pages 407-428, April.
  18. 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.
  19. Dekel, Eddie, 1986. "An axiomatic characterization of preferences under uncertainty: Weakening the independence axiom," Journal of Economic Theory, Elsevier, vol. 40(2), pages 304-318, December.
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