Advances and Extensions in Reference-Dependent Models
Saturday, Jan. 4, 2020 2:30 PM - 4:30 PM (PDT)
- Chair: Charles Sprenger, University of California-San Diego
Reference Dependence and Attribution Bias: Evidence from Real-Effort Experiments
AbstractIn this paper, we experimentally investigate whether participants exhibit a previously undocumented form of attribution bias stemming from reference-dependent preferences. In our baseline experiment, participants learned from experience about one of two unfamiliar tasks, one more onerous than the other. Some participants were assigned their task by chance just prior to their initial experience, while others knew in advance which task they would face. In a second session conducted hours later, we elicited those participants' willingness to work again at that same task. Participants assigned the less-onerous task by chance were more willing to work than those who faced it with certainty (or high probability). Conversely, participants assigned the more-onerous task by chance were less willing to work than those who faced it with certainty. These qualitative results, and the fact that differences in willingness to work remained hours after initial impressions were formed, are consistent with the idea that participants mistakenly attributed sensations of positive or negative surprise (relative to expectations) to the effort cost of their assigned task.
Loss Attitudes in the United States Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE)
AbstractWe introduce DOSE—Dynamically Optimized Sequential Experimentation—and use it to estimate individual-level loss aversion in a representative sample of the U.S. pop- ulation (N = 2,000). DOSE elicitations are more accurate, more stable across time, and faster to administer than standard methods. We find that around 50% of the U.S. population is loss tolerant. This is counter to earlier findings, which mostly come from lab/student samples, that a strong majority of participants are loss averse. Loss attitudes are correlated with cognitive ability: loss aversion is more prevalent in people with high cognitive ability, and loss tolerance is more common in those with low cog- nitive ability. We also use DOSE to document facts about risk and time preferences, indicating a high potential for DOSE in future research.
Heterogeneity of Gain-Loss Attitudes and Expectations-Based Reference Points
AbstractThis project examines the role of heterogeneity in gain-loss attitudes for identi- fying models of expectations-based reference dependence (Kőszegi and Rabin, 2006, 2007) (KR). Different gain-loss attitudes lead to different signs for KR comparative statics. Failure to account for the known heterogeneity in gain-loss attitudes is a cen- tral confounding factor challenging prior tests of the KR model conducted under the assumption of universal loss aversion. We document heterogeneous treatment effects over gain-loss types in both an initial experiment and an exact replication. Rec- ognizing heterogeneity over types allows us to both recover the KR model’s central predictions, and account for inconsistency across prior empirical tests.
- D1 - Household Behavior and Family Economics
- D9 - Micro-Based Behavioral Economics