Reference dependence (7-70)

Reference dependence is a concept in economics that suggests that individuals are more likely to compare their current outcomes to what they might have achieved in the past. It states that when making decisions about the future, people tend to think about how their outcome might be better or worse than what they would have gotten if they had chosen differently in the past. By referencing potential outcomes relative to past opportunities or outcomes, reference dependence biases decisions and induces people to make choices that may not be consistent with their long-term objectives.