Reference Points and Effort Provision

40 Pages Posted: 19 Jan 2009

See all articles by Johannes Abeler

Johannes Abeler

IZA Institute of Labor Economics; University of Nottingham

Armin Falk

University of Bonn - Economic Science Area; briq - Institute on Behavior & Inequality

Lorenz Goette

University of Lausanne; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

David Huffman

IZA Institute of Labor Economics; Swarthmore College

Multiple version iconThere are 3 versions of this paper

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.

Keywords: reference points, expectations, loss aversion, risk aversion, disappointment, experiment

JEL Classification: C91, D01, D84, J22

Suggested Citation

Abeler, Johannes and Falk, Armin and Goette, Lorenz F. and Huffman, David, Reference Points and Effort Provision. IZA Discussion Paper No. 3939, Available at SSRN: https://ssrn.com/abstract=1329577 or http://dx.doi.org/10.2139/ssrn.1329577

Johannes Abeler (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Nottingham

University Park
Nottingham, NG8 1BB
United Kingdom

Armin Falk

University of Bonn - Economic Science Area ( email )

briq - Institute on Behavior & Inequality

Schaumburg-Lippe-Straße 5-9
Bonn, 53113
Germany

HOME PAGE: http://www.briq-institute.org/

Lorenz F. Goette

University of Lausanne ( email )

Department of Economics
Batiment Internef
Lausanne, 1015
Switzerland
(021) 692'3496 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org

David Huffman

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Swarthmore College

500 College Ave
Swarthmore, PA 19081
United States

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