Axiomatic Reference-Dependence in Behavior toward Others and toward Risk
This paper considers the applicability of the standard separability axiom for both risk and other-regarding preferences, and advances arguments why separability might fail. An alternative axiom, which is immune to these arguments, leads to a preference representation that is additively separable in...
Veröffentlicht in: | Economic Theory. - Springer, 1991. - 28(2006), 3, Seite 681-692 |
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1. Verfasser: | |
Format: | Online-Aufsatz |
Sprache: | English |
Veröffentlicht: |
2006
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Zugriff auf das übergeordnete Werk: | Economic Theory |
Schlagworte: | Other-regarding preferences Risk Separability Axiomatic foundation Prospect theory D81 D64 Economics Behavioral sciences Mathematics |
Zusammenfassung: | This paper considers the applicability of the standard separability axiom for both risk and other-regarding preferences, and advances arguments why separability might fail. An alternative axiom, which is immune to these arguments, leads to a preference representation that is additively separable in a reference variable and the differences between the other variables and the reference variable. For other-regarding preferences the reference variable is the decision-maker's own payoff, and the resulting representation coincides with the Fehr-Schmidt model. For risk preferences the reference variable is initial wealth, and the resulting representation is a generalization of prospect theory. |
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ISSN: | 14320479 |