Self-serving biased reference points
The 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.
|Date of creation:||Nov 2009|
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- Botond Kőszegi & Matthew Rabin, 2006.
"A Model of Reference-Dependent Preferences,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 121(4), pages 1133-1165.
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- Koszegi, Botond & Rabin, Matthew, 2004. "A Model of Reference-Dependent Preferences," Department of Economics, Working Paper Series qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Botond Koszegi & Matthew Rabin, 2005. "A Model of Reference-Dependent Preferences," Levine's Bibliography 784828000000000341, UCLA Department of Economics.
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