Can reference points explain wage rigidity? Experimental evidence

Abstract I examine whether reference points can provide an explanation for rigid wages in recessions. Even though a recession provides good reason to adjust downward, workers’ perception of “fair wage” may depend on their previous wage, point. Using laboratory experiment, test this idea by varying initially concluded contracts—and stipulated wages—can serve as points. My experimental results show that with initial contracts workers punish wage cuts even recessions, leading considerable more wages. Surprisingly, is true without “objective” justification feel entitled contracts.