1. Are reference points merely lagged beliefs over probabilities?
- Author
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Heffetz, Ori
- Subjects
- *
PROBABILITY theory , *PROSPECT theory - Abstract
What explains the mixed evidence from laboratory tests of Kőszegi and Rabin's (2006 and later) model of expectations-based reference-dependent preferences? We investigate one hypothesis: to become (behavior-affecting) reference points, probability beliefs have to sink in —being merely lagged , as the theory requires, is not sufficient. Past experiments with conflicting findings exogenously endowed subjects with beliefs that were equally lagged, but possibly unequally sunk-in. In four experiments, whose designs replicate past KR-nonsupporting experiments, we add new sink-in manipulations that endow individuals with additional, visual/physical probability impressions. Our findings are more KR-supporting in an endowment-effect setting but not in an effort-provision setting. [ABSTRACT FROM AUTHOR]
- Published
- 2021
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