Falling Behind: Time and Expectations

Summary

Date: 
October 2, 2015 - 11:00am
Location: 
NW 243
About the Speaker
Name: 
Rahul Bhui (Camerer Group, Caltech)

Taking longer than expected to complete a task can cause dissatisfaction in and of itself if the expectation constitutes a reference point. I test the theory of expectations-based reference dependence in the time dimension. In a real-effort experiment I provide some participants with information about task completion time. As the theory predicts, observed completion times tend to cluster around the reference point even at the cost of forgone wages, and those who fall behind the point are more displeased, an effect which disappears with experience. I also construct a hybrid neuroeconomic model to structurally estimate the loss aversion parameter while conventional approaches fail due to endogeneity of the decision rule.