Reference-Dependent Subjective Expected Utility

A referenc'8---bcb' generalisation ofsubjecbw8 expecc utility theory is presented. In this theory,preferencb betweenacw depend both on finaloutcD---: and onreferenc points (whic may e uncL':bw acL' It iscD'GPGbwD:FL y a set of axioms in a Savage-style framework. A restricDF form of the theory separates attitudes to end states(encsb8 in a `satisfacF---L funcfacF from attitudes to gains and losses ofsatisfacD---qP Given weak additional assumptions, the restricbw theoryexcrybD ccry ofcb8'---q explains o served disparities etween willingness-to-pay and willingness-to-acbD' valuations of lotteries, and predicD preferenc reversal