Reference Points and Effort Provision

American Economic Association Reference Points and Effort Provision

Dynamic Consistency and Reference Points

This note provides a positive answer to the following question. Is it possible to define a set of preference relations, one for each node of a decision tree, such that these preferences satisfy the reduction of compound lotteries axiom and dynamic consistency, and yet do not converge to expected utility? It is argued that updated preferences necessarily have one affine indifference curve but th...

Savings , subgoals , and reference points

Decision makers often save money for a specific goal by forgoing discretionary consumption and instead putting the money toward the savings goal. We hypothesized that reference points can be exploited to enhance this type of saving. In two hypothetical scenario studies, subjects made judgments of their likelihood to forgo a small expenditure in order to put the money toward the savings goal. In...

Noncontractible Investments and Reference Points

We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer’s value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum can be achieved by giving the seller the right to make a take-it-or-leave-it offer. However, with shading, such a contract cre...

Social Reference Points

The authors performed two experiments in which subjects were asked to make similarity judgments about social concepts, varying the direction of the comparison specified by the question. Asymmetries in rated similarity were used to diagnose concepts that function as habitual reference points. In Experiment 1 subjects rated a friend as more similar to themselves than vice versa along both social ...