Reference point formation over time : a weighting function approach


Baucells, Manel ; Weber, Martin ; Welfens, Frank


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URL: http://ub-madoc.bib.uni-mannheim.de/2525
URN: urn:nbn:de:bsz:180-madoc-25251
Document Type: Working paper
Year of publication: 2007
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: C91 D14 D81 G11 ,
Subject headings (SWD): Wirtschaft , Richtwert , Experiment
Abstract: Although the concept of reference point dependent preferences has been adopted to almost all fields of behavioral economics, especially marketing and behavioral finance, we still know very little about how decision makers form their reference points given a sequence of prices. Our paper provides both a theoretical framework on reference point formation over time, based on cumulative prospect theory’s s-shaped weighting function, and a new experimental method for eliciting subjects’ individual reference points in a finance context. Consistent with our model, we document our subjects’ reference points to be best described by the first and the last price of the time series, with the equally weighted average and the highest price receiving smaller weights.. Results, however, vary strongly on the individual level and are also affected by the elicitation question applied.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Baucells, Manel ; Weber, Martin ; Welfens, Frank (2007) Reference point formation over time : a weighting function approach. Open Access [Working paper]
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