The most famous view of prospect theory is that decision-making depends on reference points.
What do you mean? Suppose your office is at a constant temperature, you can't feel the temperature, but when you walk out of the office in autumn, a gust of wind blows, and you will feel a little cold. The temperature in the office is the reference point. But after staying outside for a while, do you feel nothing about the temperature again? At this time, the outdoor temperature becomes the reference point.
Increasing function of expected utility theory that utility is wealth. Although the marginal utility is decreasing, the utility is definitely higher when the wealth level is high than when the wealth level is low. But is this really the case?
For example, the company gave you a bonus of 10 thousand yuan this month. Are you happy?
According to the traditional expected utility theory, you certainly know whether you are happy or not, because the absolute value of 10 thousand yuan is certain. But you might say, wait a minute, I have to see how much money my colleagues have taken first. If they take 5 thousand, I'm happy. If they all take 30 thousand, I'm not happy. So the reference point is the bonus level of colleagues.
Prospect theory holds that utility does not depend on the feeling brought by the absolute value of wealth, but on who to compare with, that is, the position of the reference point. Different reference points have different effects.
It is found that the reference point is related to the following factors.
In the financial field, the most important reference point for the historical level of investment is the cost price. Investors always compare the current price with the cost price, which I call "looking back". Looking back is compared with history, while rational people are looking forward and looking forward to the future.
"I have earned 20% and can sell it" and "I'll leave when I'm done" ... These common investment decisions are actually "looking back". Whether it is 20% or not, you have been comparing with your own cost price when making decisions, and this reference point has become an important factor affecting your decision.
The reference point of historical level includes the highest price and the lowest price besides the cost price.
For example, now that the price has dropped a little, if I buy more, won't it dilute the cost? Dilution cost means that you decide to set the reference point at the nearest high or low point.
Expectation level refers to a level of psychological expectation.
For example, the cost of buying a house is 6.5438+0 million, but the expected level may be 5 million, so the reference point of the selling price may be 5 million, not 6.5438+0 million.
The reference point of decision-making is the decision of peers or friends, which is called the "peer effect" of decision-making.
Professor Lu Rong's research found that in the field of corporate finance, the company's capital structure (debt ratio) will refer to companies in the same industry, and whether the company violates the rules will also be affected by companies in the same region.
Foreign studies have found that the dividend level of companies will be affected by companies in the same industry.
There is also a strong "peer effect" in investment decisions. Many people don't look at the investment object, but look at what their friends and experts have bought and sold, and then make decisions accordingly.
Kahneman and Tworsky pointed out: "People's decisions can be manipulated by changing the reference point."
For example, when a shopping mall is promoting sales, if a dress of 3,000 yuan is sold at the original price, it is better to sell it at the original price of 30,000 yuan. Now 1 discount. The original price is the reference point for customers to make decisions, and 1 discount makes people feel cheap. Many people don't look at the absolute price or whether they really need it, but at the cheap price. "Cheap" needs reference points, and reference points are often used by sellers.
Another example is the split share structure. When the price of a stock is very high, which affects the trading volume of the stock and the desire of investors (especially retail investors), then the joint-stock company will consider splitting the stock. After the stock price is lowered, investors (especially retail investors) will feel that the stock price is "cheap" and will rush to buy it. In fact, after the stock split, the shareholders' rights and interests remain unchanged, and the company's total market value and fundamentals remain unchanged.
At present, major websites have artificially created many promotion days, and many platform businesses will participate. By controlling the reference point, customers will have the illusion of "cheap" and effectively achieve the purpose of promoting sales. This is the behavioral basis for the existence of various artificial festivals.
Any choice should not look at the absolute level, but at the relative level. The reference point is related to historical level, expected level, decision-making of others, etc.
The reference point can also be controlled and adjusted. For example, you still feel unhappy or ineffective, without exception, it must be because the reference point is set high! Try to lower some reference points and your happiness will come naturally.