A genuine foundation for prospect theory

Ulrich Schmidt, Horst Zank

Research output: Contribution to journalArticlepeer-review


In most models of (cumulative) prospect theory, reference dependence of preferences is imposed beforehand and the location of the reference point is determined exogenously. This paper presents principles that provide critical tests and foundations for prospect theory preferences without assuming reference-dependent preferences a priori. Instead, reference dependence is derived from behavior and the reference point arises endogenously. © 2012 Springer Science+Business Media New York.
Original languageEnglish
Pages (from-to)97-113
Number of pages16
JournalJournal of Risk and Uncertainty
Issue number2
Publication statusPublished - Oct 2012


  • Diminishing sensitivity
  • Prospect theory
  • Reference dependence
  • Reference point
  • Utility


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