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Search behaviour with reference point preferences : theory and experimental evidence

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  • Schunk, Daniel

Abstract

People are heterogeneous with respect to their behaviour in sequential decision situations. This paper develops models for search behaviour under the assumption of expected-utility maximisation and a new search model that assumes sequential updating of utility reference points during the search process. I find experimental evidence that supports the new reference point model: Individual loss aversion is systematically related to the observed search behaviour in a way that is consistent with the predictions of the reference point model. Risk attitude is not related to search behaviour. The finding that many people set reference points in sequential decision tasks is of interest in, e.g. consumer economics, labour economics, finance, and decision theory.

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  • Schunk, Daniel, 2005. "Search behaviour with reference point preferences : theory and experimental evidence," Papers 05-12, Sonderforschungsbreich 504.
    • Handle: RePEc:mnh:spaper:2666
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    File URL: https://madoc.bib.uni-mannheim.de/2666/1/dp05_12.pdf
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    More about this item

    Keywords

    dynamic choice ; sequential decision behaviour ; reference points ; loss aversion ; preference elicitation ; risk aversion;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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