Outcomes are commonly perceived as
positive or negative in relation to a reference
outcome that is judged neutral.
Variations of the reference point can
therefore determine whether a given outcome
is evaluated as a gain or as a loss.
Because the value function is generally
concave for gains, convex for losses, and
steeper for losses than for gains, shifts of
reference can change the value difference
between outcomes and thereby
reverse the preference order between
options (6). Problems 1 and 2 illustrated
a preference reversal induced by a shift
of reference that transformed gains into
losses.