A preference foundation for constant loss aversion

作者：Peters Hans^*

来源：Journal of Mathematical Economics, 2012, 48(1): 21-25.

DOI：10.1016/j.jmateco.2011.11.003

• Decision making under risk
• Reference outcome
• Loss aversion

Following prospect theory and in particular the concept of loss aversion, introduced by Kahneman and Tversky (1979), we consider decision making under risk in which the decision maker%26apos;s preferences depend on a reference outcome. An outcome below this reference outcome is regarded as resulting from a loss: a loss decreases the decision maker%26apos;s basic utility more than a comparable gain increases this utility. An elegant and simple way to model this phenomenon was proposed by Shalev (2002): the utility of an outcome below the reference outcome is obtained from the basic utility by subtracting a multiple of the loss in basic utility: this multiple, the loss aversion coefficient, is constant across different reference outcomes. We provide a preference foundation for this loss aversion model.

• 出版日期2012-1