Job Market Talk: Benjamin Bushong

A growing body of evidence suggests that experienced utility is reference dependent and outcomes received are compared against recent expectations. When learning from experience, errors may arise if people fail to account for the fact that their utility included a reference-dependent component. In this paper, we use an experiment to examine whether biased beliefs arise from a failure to retrospectively account for sensations of positive and negative surprise. Participants learn from experience about one of two unfamiliar tasks, one more onerous than the other. Some participants were assigned their task by chance just prior to working, while others knew which task they would face with certainty. Relative to participants who knew with certainty which task they would face, participants assigned to the less-onerous task by chance were more willing to work, while participants assigned to the more-onerous task by chance were less willing to work. Consistent with participants mistakenly attributing sensations of gains or loss to the effort cost of their assigned task, participants demonstrated this differential willingness to work hours after initial impressions were formed.