Attitudes Toward Success and Failure

• Authors: Larbi Alaoui and Antonio Penta
• American Economic Journal: Microeconomics, Vol. 18, No. 1, 105 - 145, March 2026

Individuals often attach a special meaning to attaining a certain goal, and getting past a threshold marks the difference between success and failure. In this paper, we take a standard expected utility (EU) setting with an exogenous reference point that separates success from failure and define attitudes toward success and failure as features of preferences over lotteries. The distinctive feature of our definitions is that they concern a local reversal of the decision-maker’s risk attitude across the reference point. Our findings provide a unified view of several well-known models of reference-dependent preferences and suggest new forms of comparative statics exercises.