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Reference Points and Effort Provision

Author

Listed:
  • Johannes Abeler

    () (University of Nottingham)

  • Armin Falk

    () (University of Bonn)

  • Lorenz Goette

    () (University of Geneva)

  • David Huffman

    () (Swarthmore College)

Abstract

A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money that if expectations are low.

Suggested Citation

  • Johannes Abeler & Armin Falk & Lorenz Goette & David Huffman, 2009. "Reference Points and Effort Provision," Discussion Papers 2009-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  • Handle: RePEc:not:notcdx:2009-02
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    Keywords

    Reference Points; Expectations; Loss Aversion; Risk Aversion; Disappointment; Experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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