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Reference-Dependent Preferences: Evidence from Marathon Runners

Author

Listed:
  • Eric J. Allen

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Patricia M. Dechow

    (Haas School of Business, University of California, Berkeley, Berkeley, California 94705)

  • Devin G. Pope

    (Booth School of Business, University of Chicago, Chicago, Illinois 60637)

  • George Wu

    (Booth School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

Theories of reference-dependent preferences propose that individuals evaluate outcomes as gains or losses relative to a neutral reference point. We test for reference dependence in a large data set of marathon finishing times ( n = 9,789,093). Models of reference-dependent preferences such as prospect theory predict bunching of finishing times at reference points. We provide visual and statistical evidence that round numbers (e.g., a four-hour marathon) serve as reference points in this environment and as a result produce significant bunching of performance at these round numbers. Bunching is driven by planning and adjustments in effort provision near the finish line and cannot be explained by explicit rewards (e.g., qualifying for the Boston Marathon), peer effects, or institutional features (e.g., pacesetters).

Suggested Citation

  • Eric J. Allen & Patricia M. Dechow & Devin G. Pope & George Wu, 2017. "Reference-Dependent Preferences: Evidence from Marathon Runners," Management Science, INFORMS, vol. 63(6), pages 1657-1672, June.
    • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:6:p:1657-1672
    DOI: 10.1287/mnsc.2015.2417
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