The Effects Of Multiple Reference Points On Risky Decision Making Process

Reference point, proposed by Kahneman and Tversky, explains cognitive coding and the mode of information integration in human decision making process, and challenges the traditional rational decision making theory. Based on prospect theory, strategic management theory and the multiple reference points research by Ordonez et al., this work studied the effects of multiple reference points in risky decision making process from cognitive perspectives. The research established three reference points from the time dimension, the internal dimension and the external dimension. Investigation attention was focused on the effects of the action mode of multiple reference points, integrated mode of reference point matrix and person's risk preference on the risky decision making process. The relationship between satisfaction and investment choice behavior was studied as well. The main results are as follows:(1) In the case of single reference point, the level of reference point can affect the individual's investment behavior directly. There is no intermediary variable. As for multiple reference points, however, the level of the reference point matrix directly influences the investment behavior. Simultaneously, the reference point matrix also indirectly affects the investment behavior through the degree of satisfaction.(2) The level of reference point matrix has significant effects on the investment choice of decision makers. Under the lower situation, decision makers would like to adopt the choice which has the smaller possible income and the lower risk. On the other hand, under the higher situation, decision maker may adopt the choice that has the bigger possible income and the higher risk.(3) Under the condition of multiple reference points, the operational pattern of multiple reference points is separated model, that is, the competitor's actual performance, the company's goal performance and the company's actual performance may affect the risky decision making process separately.(4) Under the condition of single reference point, decision makers' satisfaction has no significant influence on investment. However, in the case of the multiple reference points, decision makers' satisfaction has significant influence on risky investment choice. When decision makers' satisfaction is lower, they would like to adopt the choice which has the smaller possible income and the lower risk; when decision makers' satisfaction is higher, they may adopt the choice that has the bigger possible income and the higher risk.(5) Under the conditions of single reference point and multiple reference points, the individuals' risk preference has significant influence on the risky investment choice. The individual who has higher risk preference would adopt the choice which has the bigger possible income and the higher risk; the individual who has higher risk preference may adopt the choice that has the smaller possible income and the lower risk.