Attention and reference dependence.

We present a model of reference dependence for riskless choice, in which we assume that reference points affect choice by directing the decision maker’s attention toward the particular attributes associated with the reference object. This model makes no assumptions about the curvature of utility and does not assume a built-in asymmetry in gains and losses. Nonetheless it is able to generate a type of loss aversion and can explain behavioral anomalies related to reference dependence. In addition, the model makes a number of novel predictions that differentiate it from existing accounts of reference dependence and can easily be extended to predict instances of choice set dependence and anchoring effects. Sensibly, for decisions about economic goods, the model implies acyclic sequential choices and any sequence of short-sighted reference-dependent decisions is guaranteed to converge to a stable personal equilibrium. (PsycINFO Database Record (c) 2019 APA, all rights reserved)