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An Essay on Labor Supply Decisions and Reference Dependent Preferences

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  • Pramanik, Subhajit

Abstract

This article presents a brief analysis of labor supply decision models using the concept of reference-dependent preference. This reference-dependent preference leads the model towards a behavioral aspect where “GainLoss utility” can be derived from standard “consumption utility” and the reference point is determined endogenously by the economic environment. At the first two sections of the article labor supply decision and reference-dependent preference has been discussed in a brief. Then three models has been discussed where the economists used the concept of reference-dependent preference to make labor supply model decisions.

Suggested Citation

  • Pramanik, Subhajit, 2021. "An Essay on Labor Supply Decisions and Reference Dependent Preferences," MPRA Paper 111499, University Library of Munich, Germany, revised 26 Dec 2021.
    • Handle: RePEc:pra:mprapa:111499
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    File URL: https://mpra.ub.uni-muenchen.de/111499/2/MPRA_paper_111499.pdf
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    References listed on IDEAS

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    1. Colin Camerer & Linda Babcock & George Loewenstein & Richard Thaler, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 407-441.
    2. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    3. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    4. Jonathan Shalev, 2000. "Loss aversion equilibrium," International Journal of Game Theory, Springer;Game Theory Society, vol. 29(2), pages 269-287.
    5. Bowman, David & Minehart, Deborah & Rabin, Matthew, 1999. "Loss aversion in a consumption-savings model," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 155-178, February.
    6. Yuan K. Chou, 2002. "Testing Alternative Models Of Labour Supply: Evidence From Taxi Drivers In Singapore," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 47(01), pages 17-47.
    7. Botond Koszegi & Matthew Rabin, 2007. "Reference-Dependent Risk Attitudes," American Economic Review, American Economic Association, vol. 97(4), pages 1047-1073, September.
    8. Henry S. Farber, 2008. "Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers," American Economic Review, American Economic Association, vol. 98(3), pages 1069-1082, June.
    9. Kobberling, Veronika & Wakker, Peter P., 2005. "An index of loss aversion," Journal of Economic Theory, Elsevier, vol. 122(1), pages 119-131, May.
    10. Henry S. Farber, 2005. "Is Tomorrow Another Day? The Labor Supply of New York City Cabdrivers," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 46-82, February.
    11. Sugden, Robert, 2003. "Reference-dependent subjective expected utility," Journal of Economic Theory, Elsevier, vol. 111(2), pages 172-191, August.
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    More about this item

    Keywords

    Prospect Theory; Behavioral Economics; Labor Supply Decisions; Reference Dependent Preference.;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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