A random reference model

Kıbrıs, Özgür and Masatlıoğlu, Yusuf Can and Suleymanov, Elchin (2023) A random reference model. (Accepted)

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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
Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Arts and Social Sciences > Academic programs > Economics
Faculty of Arts and Social Sciences
Depositing User: Özgür Kıbrıs
Date Deposited: 02 Oct 2023 15:58
Last Modified: 02 Oct 2023 15:58
URI: https://research.sabanciuniv.edu/id/eprint/48117

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