Lagged beliefs and reference-dependent utility
Journal of Economic Behavior & Organization(2019)
Abstract
Models of expectation-based reference-dependent preferences proposes that the reference point to which consumption outcomes are compared is endogenously determined as a function of lagged, probabilistic beliefs. This paper presents an experiment designed to test some predictions of expectation-based reference dependence models. The design induces a stochastic reference point via a lottery and then measures valuations for a commodity. The experimental results find no effect of the first stage lottery on commodity valuation.
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Key words
Expectations,Beliefs,Reference-dependent preferences,Endowment effect,Prospect theory,Experiment
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