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Reference-Dependent Preferences: A Theoretical and Experimental Investigation of Individual Reference-Point Formation

Reference-Dependent Preferences: A Theoretical and Experimental Investigation of Individual Reference-Point Formation

Paperback

EconomicsManagement

ISBN10: 365800634X
ISBN13: 9783658006341
Publisher: Springer Gabler
Published: Nov 3 2012
Pages: 224
Weight: 0.65
Height: 0.51 Width: 5.83 Depth: 8.27
Language: English

Most of our daily decisions are made under uncertainty and risk, without complete information about all relevant aspects. We all constantly make such decisions, from the simplest should I take my raincoat today? to more serious examples, such as those on investment and portfolio decisions, holding of shares, insurance patterns, or negotiation processes. Within these situations, the bounded rationality of individuals and institutions towards risk and uncertainty is embedded. The central theory underlying this study is prospect theory, an adequate model to predict the real and most often bounded rationality of human behavior given certain incentives, preferences, and constraints.

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