Reference-Dependence and Marginal Utility: Alt, Samuelson, and Bernardelli

This article shows that the possibility of formally incorporating reference-dependence into the theory of consumer behavior was explored well before Kahneman and Tversky in the early 1990s; specifically, in separate papers by Alt, Samuelson, and Bernardelli in the late 1930s. These papers emerged within a debate on the relationship between marginal utility and the ordinality/cardinality of utility. The present article identifies Alt’s, Samuelson’s, and Bernardelli’s contributions and delineates the relationship between marginal utility and reference-dependence. It also discusses the reception of their ideas by other economists and suggests some reasons for their neglect.