We study the consumption and portfolio selection problem of an agent who faces consumption irreversibility: there is disutility from changing consumption levels. The derived preference exhibits intertemporal loss aversion toward consumption changes with the previous consumption level being the...

We propose a model of instrumental belief choice under loss aversion. When new information arrives, an agent is prompted to abandon her prior. However, potential posteriors may induce her to take actions that generate a lower utility in some states than actions induced by her prior. These losses...