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Revealed Preference Foundations of Expectations-Based Reference-Dependence

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Abstract

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.

Suggested Citation

  • David Freeman, 2013. "Revealed Preference Foundations of Expectations-Based Reference-Dependence," Discussion Papers dp13-10, Department of Economics, Simon Fraser University.
  • Handle: RePEc:sfu:sfudps:dp13-10
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    File URL: http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp13-10.pdf
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    Cited by:

    1. Yusufcan Masatlioglu & Collin Raymond, 2016. "A Behavioral Analysis of Stochastic Reference Dependence," American Economic Review, American Economic Association, vol. 106(9), pages 2760-2782, September.
    2. Daniele Pennesi, 2013. "Endogenous Status Quo," Carlo Alberto Notebooks 314, Collegio Carlo Alberto.
    3. Park Hyeon, 2016. "Loss Aversion and Consumption Plans with Stochastic Reference Points," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 303-336, January.

    More about this item

    Keywords

    Reference-dependent preferences; expectations as the reference point; preferred personal equilibrium; choice under risk;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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