Expectations-Based Reference-Dependence and Choice Under Risk

Abstract This article characterises the behavioural content of a model of choice under risk with reference-dependent preferences and endogenous expectations-based reference points based on the preferred personal equilibrium model of Kőszegi and Rabin (2006). The combination of reference-dependent preferences and endogenous reference points leads to violations of the Independence Axiom and can also lead to violations of the Weak Axiom of Revealed Preference. An axiomatic characterisation shows that the model places testable restrictions on choice under risk.

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A prospect-based user equilibrium model with endogenous reference points and its application in congestion pricing

Transportation Research Part B Methodological ◽

10.1016/j.trb.2010.09.003 ◽

2011 ◽

Vol 45 (2) ◽

pp. 311-328 ◽

Cited By ~ 88

Author(s):

Hongli Xu ◽

Yingyan Lou ◽

Yafeng Yin ◽

Jing Zhou

Keyword(s):

Equilibrium Model ◽

Congestion Pricing ◽

User Equilibrium ◽

Reference Points ◽

Endogenous Reference

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Daily Labor Supply and Adaptive Reference Points

The American Economic Review ◽

10.1257/aer.20170768 ◽

2021 ◽

Vol 111 (8) ◽

pp. 2417-2443

Author(s):

Neil Thakral ◽

Linh T. Tô

Keyword(s):

Labor Supply ◽

Reference Point ◽

Structural Model ◽

Reference Points ◽

Degree Of Freedom ◽

Reference Dependence ◽

Field Evidence ◽

Dynamic View ◽

Expected Earnings ◽

Dependence Models

This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. Examining this in the context of cabdrivers’ daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work toward a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles conflicting “neoclassical” and “behavioral” interpretations of evidence on daily labor-supply decisions. (JEL J22, J31, L94)

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Appendix 3. The Weak Axiom of Revealed Preference and the Slutsky Decomposition

Market Demand ◽

10.1515/9781400863716.175 ◽

1994 ◽

pp. 175-179

Keyword(s):

Revealed Preference ◽

Weak Axiom

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ON INTERRELATIONS BETWEEN FUZZY CONGRUENCE AXIOMS

New Mathematics and Natural Computation ◽

10.1142/s1793005712500044 ◽

2012 ◽

Vol 08 (03) ◽

pp. 297-310

Author(s):

S. R. CHAUDHARI ◽

S. S. DESAI

Keyword(s):

Transitive Closure ◽

Revealed Preference ◽

Arbitrary Domain ◽

Fuzzy Congruence ◽

Weak Axiom

In this paper we establish interrelations between fuzzy direct revelation axiom (FDRA), fuzzy transitive-closure coherence axiom (FTCCA), fuzzy consistent-closure coherence axiom (FCCCA) and fuzzy intermediate congruence axiom (FICA). We also establish their relationships with weak fuzzy congruence axiom (WFCA), strong fuzzy congruence axiom (SFCA) and weak axiom of fuzzy revealed preference (WAFRP). Condition for equivalence of fuzzy Arrow axiom (FAA) and weak fuzzy congruence axiom (WFCA) on arbitrary domain is also given.

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