Abstract:

According to prospect theory, decision makers’ gain or loss determined by their current states has a profound effect on decisions under risk. In the current paper, the status quo of decision makers is defined as individual reference point, which determines the context as individual gain or loss. Individual reference point is direct, actual, and absolute given that it affects the actual payoffs of decision makers. However, as social comparison theory goes, decision making is also a matter of social comparison. Thus, the status of others is defined as social reference point, which determines social gain or loss. Social reference point is indirect, hypothetical, and relative because it does not influence the actual payoffs of decision makers directly. Risky decision making is affected by social reference point through self-concept, emotion, and cognition. More importantly, both individual and social reference points exist in risky decision making. They have similar impacts on decision makers, both psychologically and behaviorally, thus affecting risky choice jointly. Therefore, the paper proposes the effects of double reference points on risky decision making. However, further research is needed on the mechanisms of double reference points.

Key words: risky decision making, social reference point, individual reference point, social comparison theory, prospect theory