Reference Points and Effort Provision

Abeler, Johannes; Falk, Armin; Götte, Lorenz and Huffman, David (May 2011): Reference Points and Effort Provision. SFB/TR 15 Discussion Paper No. 358

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 than if expectations are low.

• Item Type: Paper
• Keywords: Reference Points, Expectations, Loss Aversion, Disappointment, Experiment
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C8 - Verhaltensökonomische Implikationen für Institutionen
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C91, D01, D84, J22
• Language: English