Why are some sale items subject to limited availability while other substitute items are available in large quantities and are priced relatively high at the same point in time? Can such a retail strategy lure consumers into purchasing the more expensive item? This paper characterizes the...

We provide a hidden-action principal-agent model where the agent has referencedependent preferences. The loss-averse agent considers the base wage as reference point, and bonuses and/or penalties as gains and losses, respectively. When choosing optimal payments, the principal strategically sets...

This paper provides revealed preference foundations for a model of expectations based reference-dependence a la Koszegi and Rabin (2006). Novel axioms provide distinguishing features of expectations-based reference-dependence under risk. The analysis completely characterizes the model’s...

We analyze a simple task-assignment model in which a principal assigns a task to one of two agents depending on the state. If the agents have standard concave utility, the principal assigns the task to an agent with the highest productivity in each state. In contrast, if the agents are loss...

This study test whether social reference points impact individual risk taking. In a laboratory experiment, decision makers observe the earnings of a peer subject before making a risky choice. We exogenously manipulate the peer earnings across two treatments. We find a signicant treatment effect...

This study test whether social reference points impact individual risk taking. In a laboratory experiment, decision makers observe the earnings of a peer subject before making a risky choice. We exogenously manipulate the peer earnings across two treatments. We find a significant treatment...

This article presents a practical approach to estimate the substitution probabilities between products at a retail store by using the store's point of sale data and prospect theory based structural restrictions on the consumer choice behavior. The prospect theory-based reference dependent...