Reference-dependent subjective expected utility

Sugden, Robert (2003) Reference-dependent subjective expected utility. Journal of Economic Theory, 11 (2). pp. 172-191. ISSN 0022-0531

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A reference-dependent generalisation of subjective expected utility theory is presented. In this theory, preferences between acts depend both on final outcomes and on reference points (which may be uncertain acts). It is characterised by a set of axioms in a Savage-style framework. A restricted form of the theory separates attitudes to end states (encoded in a ‘satisfaction function’) from attitudes to gains and losses of satisfaction. Given weak additional assumptions, the restricted theory excludes cycles of choice, explains observed disparities between willingness-to-pay and willingness-to-accept valuations of lotteries, and predicts preference reversal.

Item Type: Article
Faculty \ School: Faculty of Social Sciences
Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Groups > Economic Theory
Faculty of Social Sciences > Research Groups > Behavioural Economics
Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences
Depositing User: Vishal Gautam
Date Deposited: 01 Aug 2003
Last Modified: 22 Apr 2023 02:04
DOI: 10.1016/S0022-0531(03)00082-6

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