Heterogeneity of Loss Aversion and Expectations-Based Reference Points (with Lorenz Goette, Thomas Graeber, and Charles Sprenger) Draft Available Here.[submitted]
This project examines the role of heterogeneity in gain-loss attitudes for identifying models of expectations- based reference dependence (Kőszegi and Rabin, 2006, 2007) (KR). As preferences shift from loss averse to gain loving, theoretical predictions of the KR indicate different signs for comparative statics previously used to test the KR model. In an initial experiment with 607 subjects and an exact replication with a further 417, we show heterogeneous treatment effects over gain-loss types. Recognizing heterogeneity in these preferences allows us to reliably recover the KR model’s central element of expectations-based reference points.
Work in Progress
Reference Dependent Effort Provision under Heterogenous Gain-Loss Attitudes (with Pol Campos-Mercade, Lorenz Goette, and Charles Sprenger)
This project explores the extent to which heterogeneity in gain-loss attitudes confounds the mixed results in prior experimental test of KR(2006) in the real effort domain. Using the intuitions from Goette et al (2019), we design a similar two-stage experiment to determine whether previously measured gain-loss parameters predict behavior in the classic Abeler et al (2010) test of KR in effort supply.
Contract Selection and Induced Effort with Reference-Dependent Agents
In this paper, I explore the implications of heterogeneity of gain-loss attitudes on sorting in the labor market. Building off of Herweg et al (2010), I demonstrate theoretically that gain loving and loss averse agents have quite different preferences over contract types, and respond in distinct ways to common incentive schemes. I then design a lab experiment employing a probabilistic bonus/penalty framing of contracts to test predictions of the model in this particular context.