A theory of reference point formation
O. Kıbrıs, Y. Masatlioglu, and E. Suleymanov ,
Economic Theory

We introduce a model of reference-dependent choice where the reference point is endogenously determined through maximization of a conspicuity ranking. This subjective ranking captures how prominent or eye-catching the alternatives are relative to one another. The most conspicuous alternative in a choice set serves as the reference point and in turn determines the reference-dependent utility function the decision maker maximizes to make a choice.

Links to Researchers