- A-Z
- Jena Economics Rese...
- Volume 1
- Don’t aim too high:...
- Autor(in)
- Erschienen
- 4. Dezember 2007
- Nummer des Discussion-Papers
-
2007-097
- Schlagwort(e)
-
aspirations
expectations
experiments
individual utility
reference state
- Zusammenfsg.
-
The higher our aspirations, the higher the probability that we have to adjust them downwards when forming more realistic expectations later on. This paper shows that the costs induced by high aspirations are not trivial. We first develop a theoretical framework to identify the factors that determine the effect of aspirations on expected utility. Then we present evidence from a lab experiment on the factor found to be crucial: the adjustment of reference states to changes in expectations. The results suggest that the costs of high aspirations can be significant, since reference states do not adjust quickly. We use a novel, indirect approach that allows us to infer the determinants of the reference state from observed behavior, rather than to rely on cheap talk.
- article pub. typess JER
- Research article
- article languages JER
- Englisch
- article research fields JER
- experimental economics
- JEL-Classification for JER
- D11 - Consumer Economics: Theory ; D84 - Expectations; Speculations ; C91 - Laboratory, Individual Behavior
- URN
- urn:nbn:de:urmel-e2d227d2-ce7a-41be-bdaa-f97e991052886-00095465-12