Economics at your fingertips  

Self-serving biased reference points

Andrea Gallice ()

No 223, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper formalizes the pervasive phenomenon of the self-serving bias within the framework of reference dependent preferences. This formulation allows the stating of a simple rule to assess the existence of the bias at the aggregate level as well as a procedure that identifies the minimum number of biased agents. We apply the model to two standard situations: a litigation between a plaintiff and a defendant and a bankruptcy problem. In the litigation case, we show how the combination of self-serving bias and reference dependent preferences increases the likelihood that a dispute proceeds to trial. In the bankruptcy case, we show how the existence of individuals with self-serving biased reference points exacerbates the conflict between equity and efficiency of the final allocation.

Keywords: self-serving bias; reference dependent preferences; litigation; trial vs settlement; bankruptcy problem; optimal allocation (search for similar items in EconPapers)
JEL-codes: D03 D63 K41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Working Paper: Self-serving biased reference points (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Carlo Alberto Notebooks from Collegio Carlo Alberto Contact information at EDIRC.
Bibliographic data for series maintained by Giovanni Bert ().

Page updated 2022-04-22
Handle: RePEc:cca:wpaper:223