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Title:Yesterday's expectation of tomorrow determines what you do today: the role of reference-dependent utility from expectations PDF Logo
Authors:Matthey, Astrid
Issue Date:2008
Series/Report no.:Jena economic research papers 2008,003
Abstract:The paper introduces the concept of adjustment utility, that is, referencedependent utility from expectations. It offers an explanation for observed preferences that cannot be explained with existing models, and yields new predictions for individual decision making. The model gives a simple explanation for, e.g., why people are reluctant to change their plans even when these turn out to be unexpectedly costly; people’s aversion towards positive but false information, which cannot be explained with previous models; and the increasing acceptance of risks when people get used to them.
Subjects:utility
expectations
reference-dependent preferences
anticipation
prospect theory
experiments
JEL:D11
D81
D84
C99
Document Type:Working Paper
Appears in Collections:Jena Economic Research Papers, MPI für Ökonomik

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