A Model of Reference-Dependent Preferences

We develop a model of reference-dependent preferences and loss aversion where "gain-loss utility" is derived from standard "consumption utility" and the reference point is determined endogenously by the economic environment. We assume that a person's reference point is her rational expectations held in the recent past about outcomes, which are determined in a personal equilibrium by the requirement that they must be consistent with optimal behavior given expectations. In deterministic environments, choices maximize consumption utility, but gain-loss utility influences behavior when there is uncertainty. Applying the model to consumer behavior, we show that willingness to pay for a good is increasing in the expected probability of purchase and in the expected prices conditional on purchase. In within-day labor-supply decisions, a worker is less likely to continue work if income earned thus far is unexpectedly high, but more likely to show up as well as continue work if expected income is high. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Constraining the Evolution of ZZ Ceti

We report our analysis of the stability of pulsation periods in the DAV star (pulsating hydrogen atmosphere white dwarf) ZZ Ceti, also called R548. On the basis of observations that span 31 years, we conclude that the period 213. 13 s observed in ZZ Cet