Reference-Dependent Preferences: Evidence from Marathon Runners

50 Pages Posted: 4 Aug 2014

See all articles by Eric J. Allen

Eric J. Allen

University of Southern California - Leventhal School of Accounting

Patricia Dechow

USC Marshall School of Business

Devin G. Pope

University of Chicago - Booth School of Business

George Wu

University of Chicago - Booth School of Business

Date Written: July 2014

Abstract

Models of reference-dependent preferences propose that individuals evaluate outcomes as gains or losses relative to a neutral reference point. We test for reference dependence in a large dataset of marathon finishing times (n = 9,524,071). Models of reference-dependent preferences such as prospect theory predict bunching of finishing times at reference points. We provide visual and statistical evidence that round numbers (e.g., a four-hour marathon) serve as reference points in this environment and as a result produce significant bunching of performance at these round numbers. Bunching is driven by planning and adjustments in effort provision near the finish line and cannot be explained by explicit rewards (e.g., qualifying for the Boston Marathon), peer effects, or institutional features (e.g., pacesetters). We calibrate a simple model of prospect theory as well as other models of reference dependence and show that the basic qualitative shape of the empirical distribution of finishing times is consistent with parameters that have previously been estimated in the laboratory.

Suggested Citation

Allen, Eric J. and Dechow, Patricia and Pope, Devin G. and Wu, George, Reference-Dependent Preferences: Evidence from Marathon Runners (July 2014). NBER Working Paper No. w20343. Available at SSRN: https://ssrn.com/abstract=2475690

Eric J. Allen

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

Patricia Dechow

USC Marshall School of Business ( email )

Los Angeles, CA 90089-0441
United States

Devin G. Pope

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

George Wu

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
31
Abstract Views
554
PlumX Metrics