Abstract
We consider a model for utility over consumption with first order loss aversion and look at its properties. We find consumption strategies that maximize expected utility for complete markets with pricing kernels generated by Levy processes. Both the discrete-time and continuous-time consumption strategies are illustrated. When loss aversion vanishes, we recover the Samuelson-Merton solution, and when loss aversion becomes infinite, we recover the Duesenberry-Dybvig solution.
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