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Reference-Dependent Preferences

O'Donoghue, Ted and Sprenger, Charles (2018) Reference-Dependent Preferences. In: Handbook of Behavioral Economics: Applications and Foundations. Vol.1. Elsevier , Amsterdam, pp. 1-77. ISBN 9780444633743.

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In this chapter, we present theories and applications of reference-dependent preferences. We provide some historical perspective, but also move quickly to the current research frontier, focusing on developments in reference dependence over the last 20 years. We present a number of worked examples to highlight the broad applicability of reference dependence. While our primary focus is gain–loss utility, we also provide a short treatment of probability weighting and its links to reference dependence.

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Additional Information:© 2018 Elsevier B.V. Available online 17 September 2018. We are grateful to the editors, Stefano DellaVigna, Doug Bernheim, and David Laibson, as well as to Nick Barberis, Alex Rees-Jones, Ori Heffetz, Botond Koszegi, and Keith Ericson for comments and valuable conversations. We also thank participants at the Handbook of Behavioral Economics Workshop, held at Stanford University in August 2016.
Subject Keywords:Reference-dependent preferences; Loss aversion; Prospect theory; Stochastic reference points; Disappointment aversion; Rank dependent utility
Record Number:CaltechAUTHORS:20200721-134745449
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Official Citation:Ted O'Donoghue, Charles Sprenger, Chapter 1 - Reference-Dependent Preferences. Editor(s): B. Douglas Bernheim, Stefano DellaVigna, David Laibson, Handbook of Behavioral Economics: Applications and Foundations 1, North-Holland, Volume 1, 2018, Pages 1-77, ISSN 2352-2399, ISBN 9780444633743, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:104485
Deposited By: Tony Diaz
Deposited On:21 Jul 2020 21:22
Last Modified:16 Nov 2021 18:32

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