Rumen Kerekov, PhD Student in Economics
Misattribution of monetary values
Studies have shown that utility is reference dependent (e.g. Kahneman and Tversky 1979; Abeler et al. 2011; Koszegi and Rabin 2006). Thus, people care not only about the utility from consuming a good or service, but also about the degree to which it exceeds or falls short of expectations. If they are unable to disentangle the surprise factor from the intrinsic value of the outcome, they are predisposed to forming biased beliefs. This phenomenon called misattribution of reference-dependent utility has received little attention in the experimental literature. Evidence of misattribution of reference-dependence has been shown in effort-level tasks (Gagnon-Bartsch and Bushong 2017). However, other contexts have not been explored. A monetary context, for example, would be interesting to investigate both because money is not a directly consumed good, and because people have sufficient experience with money by using it in transactions on an everyday basis. Through an online experiment on Prolific, this paper will test if people misattribute sensations of elations or disappointments to the underlying quality of monetary amounts or money in general.