Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2020
  • Working Paper

Heterogeneity of Gain-Loss Attitudes and Expectations-Based Reference Points

By: Lorenz Goette, Thomas Graeber, Alex Kellogg and Charles Sprenger
  • Format:Print
  • | Language:English
ShareBar

Abstract

We examine the role of heterogeneity in gain-loss attitudes for identifying the leading behavioral model of expectations-based reference dependence (Kőszegi and Rabin, 2006, 2007) (KR). Failure to account for recently-documented heterogeneity in gain-loss attitudes is a central confounding factor challenging prior tests of KR, all conducted under the assumption of universal loss aversion. We implement a two-stage experimental design to first measure gain-loss attitudes, and, second, examine heterogeneous treatment effects over these attitudes in an exchange paradigm common to prior tests of KR. In both an initial experiment and an exact replication, we document the heterogeneous treatment effects over gain-loss attitudes predicted by the model. These findings provide foundational support for the KR model’s expectations-based mechanism and explain inconsistencies in prior empirical exercises conducted under the assumption of homogeneous loss aversion.

Keywords

Reference-dependent Preferences; Rational Expectations; Personal Equilibrium; Endowment Effect; Expectations-based Reference Points

Citation

Goette, Lorenz, Thomas Graeber, Alex Kellogg, and Charles Sprenger. "Heterogeneity of Gain-Loss Attitudes and Expectations-Based Reference Points." Working Paper, October 2020.
  • Read Now

About The Author

Thomas W. Graeber

Negotiation, Organizations & Markets
→More Publications

More from the Authors

    • 2021
    • Faculty Research

    Cognitive Uncertainty in Intertemporal Choice

    By: Benjamin Enke and Thomas Graeber
    • Proceedings of the National Academy of Sciences

    Measuring the Scientific Effectiveness of Contact Tracing: Evidence from a Natural Experiment

    By: Thiemo Fetzer and Thomas Graeber
    • March 2021
    • Attention, Perception, & Psychophysics

    Bayesian Signatures of Confidence and Central Tendency in Perceptual Judgment

    By: Yang Xiang, Thomas Graeber, Benjamin Enke and Samuel Gershman
More from the Authors
  • Cognitive Uncertainty in Intertemporal Choice By: Benjamin Enke and Thomas Graeber
  • Measuring the Scientific Effectiveness of Contact Tracing: Evidence from a Natural Experiment By: Thiemo Fetzer and Thomas Graeber
  • Bayesian Signatures of Confidence and Central Tendency in Perceptual Judgment By: Yang Xiang, Thomas Graeber, Benjamin Enke and Samuel Gershman
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College