òòò½Íø Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
A Random Reference Model
òòò½Íø Journal: Microeconomics
(pp. 155–209)
Abstract
We provide two nested models of random reference-dependent choice in which the reference point is endogenously determined by random processes. Random choice behavior is due to random reference points, even though, from the decision-maker's viewpoint, choices are deterministic. Through a revealed preference exercise, we establish when and how one can identify the reference-dependent preferences and the random reference rule from observed choice data. We also present behavioral postulates that characterize the empirical content of our models. Lastly, we investigate an application of our model to Bertrand competition with differentiated products.Citation
Kibris, Özgür, Yusufcan Masatlioglu, and Elchin Suleymanov. 2024. "A Random Reference Model." òòò½Íø Journal: Microeconomics 16 (1): 155–209. DOI: 10.1257/mic.20220089Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making