The paper studies polynomial approximation models with a new type of constraints that enable to get estimates with significant properties. Recently we enhanced a representation of polynomials based on three reference points. Here we propose a two-part cubic smoothing scheme that leverages this representation. The presence of these points in the model has several consequences. The most important...

This note provides a positive answer to the following question. Is it possible to define a set of preference relations, one for each node of a decision tree, such that these preferences satisfy the reduction of compound lotteries axiom and dynamic consistency, and yet do not converge to expected utility? It is argued that updated preferences necessarily have one affine indifference curve but th...

Decision makers often save money for a specific goal by forgoing discretionary consumption and instead putting the money toward the savings goal. We hypothesized that reference points can be exploited to enhance this type of saving. In two hypothetical scenario studies, subjects made judgments of their likelihood to forgo a small expenditure in order to put the money toward the savings goal. In...

Noninterference requires that public outputs of a program must be completely independent from secrets. While this ensures that secrets cannot be leaked, it is too restrictive for many applications. For instance, the output of a knowledge-based authentication mechanism needs to reveal whether an input matches the secret password. The research problem is to allow such exceptions without giving up...

Social reference points have been identified to be important determinants of individuals’ welfare. We investigate the consequences social for risk taking in a laboratory experiment. In main treatments, risk-taking subjects observe predetermined earnings peer when making risky choice. exogenously manipulate peers’ and find significant treatment effect: decision makers make less risk-averse choic...

We assemble two reference point based concepts of utility in our empirical study: the own status quo and social comparisons. We explore the relative relevance of these concepts for total compensation as well as for different parts of the compensation package of managers. Making use of a unique panel data set of managers of the German chemical sector, we find that social comparisons of compensat...