On the theory of reference-dependent preferences

  • Munro A
  • Sugden R
  • 87

    Readers

    Mendeley users who have this article in their library.
  • 78

    Citations

    Citations of this article.

Abstract

A theory is proposed in which preferences are conditional on reference points. It is related to Tversky and Kahneman's reference-dependent preference theory, but is simpler and deviates less from conventional consumer theory. Preferences conditional on any given reference point satisfy conventional assumptions. Apart from a continuity condition, the only additional restriction is to rule out cycles of pairwise choice. The theory is consistent with observations of status quo bias and related effects. Reference points are treated as subject to change during the course of trade. The implications of endogeneity of reference points for behaviour in markets are investigated. © 2002 Elsevier Science B.V. All rights reserved.

Author-supplied keywords

  • Loss aversion
  • Prospect theory
  • Reference-dependence
  • Status quo bias

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Alistair Munro

  • Robert Sugden

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free