Framing, Expectations and Reference Points
Recent theories of expectation-based reference-dependent preferences offer a structured approach of the formation of reference points, yet do not incorporate important context-specific characteristics. One implicit assumption is that individuals form their reference point as expectations by correctly predicting the probabilistic environment they are facing. In an experimental setup, we demonstrate that a simple change in the framing of a decision problem alters the reference point formation by evoking a different moment of first focus. Apart from providing evidence on the limitations of current theories of expectation-based reference dependence, this paper further offers a theoretical extension that overcomes these limitations and allows reference points to be contingent on contextual effects.
|Date of creation:||Nov 2016|
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