Exogenous endowment—endogenous reference point
By: Maltz, Amnon
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Material type: 
BookPublisher: The Economic Journal: A Journal of the Royal Economic Society Description: 130(625), Jan, 2020: p.160-182.Subject(s): Microeconomic Behavior, Consumer Economics, Intertemporal Choice
In:
The Economic Journal: A Journal of the Royal Economic SocietySummary: We develop a model in the presence of categories that creates a link between the agent’s exogenous endowment and an endogenous reference point. The reference point is the best feasible alternative in the endowment’s category. This reference generates a constraint set from which the final choice is made according to utility maximisation. The model predicts category bias, which generalises the status quo bias by attracting the agent to her endowment’s category but not necessarily to the endowment itself. We show that it accommodates recent experimental findings regarding the presence and absence of status quo bias in the realm of uncertainty. In a stylised financial setup, we show that it may lead to a risk premium even with risk-neutral agents. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 130(625), Jan, 2020: p.160-182 | Available | AR124684 |
We develop a model in the presence of categories that creates a link between the agent’s exogenous endowment and an endogenous reference point. The reference point is the best feasible alternative in the endowment’s category. This reference generates a constraint set from which the final choice is made according to utility maximisation. The model predicts category bias, which generalises the status quo bias by attracting the agent to her endowment’s category but not necessarily to the endowment itself. We show that it accommodates recent experimental findings regarding the presence and absence of status quo bias in the realm of uncertainty. In a stylised financial setup, we show that it may lead to a risk premium even with risk-neutral agents. – Reproduced
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