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This study investigates reference-dependent choice with a stochastic, state-dependent reference point. The optimal reference-dependent solution equals the optimal consumption solution (no loss aversion) if the reference point is selected fully endogenously. Given that loss aversion is...
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We analyze the optimal decision-making hierarchy in an organization when decision-makers of limited liability have …, every decision is made by a different agent. In a vertical hierarchy, one agent is in charge of all decisions. Only this … agent is incentivized. This advantage is outweighed if there is a horizontal hierarchy so that the decision …
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