It turns out that people are risk averse no matter what origin point you select (this is one of the major findings of prospect theory), and thus the concave function you apply will be different (will be in different places along the x-axis) depending on which reference point you present to a person.
Couldn’t this still be rational in general if the fact that a particular reference point is presented provides information under normal circumstances (though perhaps not rational in a laboratory setting)?
Couldn’t this still be rational in general if the fact that a particular reference point is presented provides information under normal circumstances (though perhaps not rational in a laboratory setting)?
I think you’ll have to give an example of such a scenario before I could comment on whether it’s plausible.