 Reference Dependence. Rather than make decisions by comparing the absolute magnitudes of welfare, as prescribed by expected utility theory, people instead tend to value prospects by their change in welfare with respect to a reference point. This reference point can be a person’s current state of wealth, an aspiration level, or a hypothetical point of reference from which to evaluate options. The intuition behind reference dependence is that our sensory organs have evolved to detect changes in sensory stimuli rather than store and compare absolute values of stimuli. Therefore, the argument goes, we should expect to see the cognitive mechanisms involved in decision-making to inherit this sensitivity to changes in perceptual attributes values.