Reference Points and Effort Provision

Johannes Abeler; Armin Falk; Lorenz Goette; David Huffman

doi:10.1257/aer.101.2.470

American Economic Review Vol. 101 No. 2 2011

Reference Points and Effort Provision

Johannes Abeler¹; Armin Falk²; Lorenz Goette³; David Huffman⁴

¹ University of Nottingham, School of Economics, Nottingham, NG7 2RD, UK. · ² University of Bonn, Adenauerallee 24, 53113 Bonn, Germany. · ³ University of Lausanne, Department of Economics, Internef, 1015 Lausanne, Switzerland. · ⁴ Swarthmore College, Economics Department, 500 College Ave., Swarthmore, PA 19081.

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.

DOI: 10.1257/aer.101.2.470
Volume: 101
Issue: 2
Pages: 470-492
Language: en
Sources: openalex bibtex:phds-export.bib crossref

Reference Points and Effort Provision

Abstract

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