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  3. American Economic Journal: Microeconomics
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  5. Attitudes towards Success and Failure

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Attitudes towards Success and Failure

  • Larbi Alaoui
  • Antonio Penta
American Economic Journal: Microeconomics (Forthcoming)

Abstract

Individuals often attach a special meaning to attaining a certain goal, and getting past a threshold marks the difference between success and failure. In this paper we take a standard EU setting with an exogenous reference point that separates success from failure, and define attitudes towards success and failure as features of preferences over lotteries. The distinctive feature of our definitions is that they all concern a local reversal of the decision maker's risk attitude across the reference point. Our findings provide a unified view of several well-known models of reference-dependent preferences, and suggest new forms of comparative statics exercises.

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