Self-serving biased reference points
AbstractThe paper formalizes the pervasive phenomenon of the self-serving bias within the framework of reference dependent preferences. This formulation allows to state a simple rule to assess the existence of the bias at the aggregate level as well as a procedure that identifies the minimum number of biased agents. As an application, we study the problem of the optimal allocation of a scarce resource among a finite number of claimants. We analyze the performance of different welfare criteria and show how the existence of self-serving biased individuals exacerbates the conflict between equity and efficiency of the final allocation.
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Bibliographic InfoPaper provided by Department of Economic Policy, Finance and Development (DEPFID), University of Siena in its series Department of Economic Policy, Finance and Development (DEPFID) University of Siena with number 0909.
Date of creation: Nov 2009
Date of revision:
Self-Serving Bias; Reference Dependent Preferences; Optimal Allocation.;
Other versions of this item:
- D00 - Microeconomics - - General - - - General
- D60 - Microeconomics - - Welfare Economics - - - General
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