REFERENCE POINT IN OPTIMIZING THE SUBJECTIVE UTILITY OF ECONOMIC DECISIONS

Elena Gospodinova, Tanya Taneva
2012 Science & Technologies   unpublished
Economic actors use different heuristics to optimize own decision utility under situation of uncertainty. Preferences of the actors to avoid risk or to accept risk are influenced by subjective predictions of outcomes in the form of gains and losses, also by subjective heuristics which are available at the time of deciding for consumption, investment, lending and more. The Reference point is a heuristic, which plays the role of a landmark position for the actors, against which they assess the
more » ... they assess the desired results. In some cases, it is their position, available at the moment of decision, while in others-it is the expected state that potentially could be achieved, taking into account exterior experience and concerning which the actors evaluate the utility of its decision. The conclusion is that it is possible perception of different reference point from actors point of view, given the present and future subjective utility of the decision.
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