On the Formation and Manipulation of Reference States
نویسنده
چکیده
Experimental and empirical evidence shows that the utility an individual derives from a certain state depends on the reference state she compares it to. According to economic theory, this reference state is determined by the past, present and future outcomes of either the individual herself or her reference group. The experiment described in this paper suggests that, in addition, reference states depend to a significant degree on non outcome-relevant environmental factors. It shows that reference states and hence utility can relatively easily be manipulated without changing people’s outcomes. JEL classification: D01, D10, C91
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