Working Paper

Endogenizing Prospect Theory's Reference Point

Kiel Working Papers, 1611

In previous models of (cumulative) prospect theory reference-dependence of preferences is imposed beforehand and the location of the reference point is exogenously determined. This note provides a foundation of prospect theory, where reference-dependence is derived from preference conditions and a unique reference point arises endogenously.

Authors

Horst Zank

Info

Publication Date
JEL Classification
D81