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My reference point, not yours

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  • Buchanan, Joy A.

Abstract

Reference points formed by initial endowments influence individual decisions. This experiment tests whether an individual can predict the behavior of other people who have different reference points. Despite financial incentives for being correct, players fail to imagine themselves in another person’s shoes. A low endowment player generally cannot predict the behavior of those who were assigned high endowments, and vice versa, when asked about group behavior. Instead of considering the perspectives of others, a low endowment player predicts that all others will act as if they all had low endowments. This controlled experiment helps explain why it is difficult to understand the perspectives of other people, while also demonstrating that it is possible when a player is specifically prompted to consider an individual in a different circumstance.

Suggested Citation

  • Buchanan, Joy A., 2020. "My reference point, not yours," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 297-311.
    • Handle: RePEc:eee:jeborg:v:171:y:2020:i:c:p:297-311
    DOI: 10.1016/j.jebo.2020.01.023
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    Cited by:

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    2. Bejarano, Hernán & Corgnet, Brice & Gómez-Miñambres, Joaquín, 2021. "Economic stability promotes gift-exchange in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 374-398.

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    More about this item

    Keywords

    Reference points; Beliefs; Experiments; Expectations;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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