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Self-serving biased reference points

Author

Listed:
  • Andrea Gallice

Abstract

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.

Suggested Citation

  • Andrea Gallice, 2009. "Self-serving biased reference points," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 0909, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    • Handle: RePEc:usi:depfid:0909
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    File URL: http://repec.deps.unisi.it/depfid/text909.pdf
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    Cited by:

    1. Andrea Gallice, 2022. "Bankruptcy Problems with Self-Serving Biased Reference Points," Carlo Alberto Notebooks 683 JEL Classification: D, Collegio Carlo Alberto.
    2. Andrea Gallice, 2012. "Strategic Announcements of Reference Points in Disputes and Litigations," Working papers 003, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    3. Yusuke Mori, 2013. "A Formal Behavioral Model of Firm Boundaries: Why Does Authority Relation Mitigate Ex Post Adaptation Problems?," ISER Discussion Paper 0863, Institute of Social and Economic Research, The University of Osaka.
    4. Andrea Gallice, 2020. "Self-Serving Biased Reference Points in Bankruptcy Problems," Working papers 067, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    5. Husnain Fateh Ahmad, 2020. "Self serving reference points in k−double auctions," Bulletin of Economic Research, Wiley Blackwell, vol. 72(1), pages 77-85, January.
    6. Mori, Yusuke & 森, 祐介, 2012. "How Can Integration Reduce Inefficiencies Due to Ex Post Adaptation?," Working Paper Series 142, Center for Japanese Business Studies (HJBS), Graduate School of Commerce and Management Hitotsubashi University.

    More about this item

    Keywords

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    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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