Prospect Theory

[doobsmeister]

What does being reference dependent mean? Expected utility utility theory is not reference dependent but prospect theory is. Can someone give an example that differentiates both?
Thanks

 

[cpk123]

you have a point of reference - and make decisions based on that reference point.
e.g. you purchased a stock for $100 and you consider that price as the minimum you should beat to consider a sale of the stock - even though the fundamentals state that the stock will never reach that price ever.

 

[GothamSenator]

+1