Making Reference-Dependent Preferences: Evidence from Door-to-Door Sales

Abstract

This paper uses novel administrative data from a sales company to test for reference-dependent daily labor supply. I show evidence that daily expectations are selected by workers based on long-run objectives and form around the bonuses paid by the firm at the end of the sales season. I find that extensive margin labor supply shifts downward substantially at a worker’s expectations-based reference. The data on long-run goal setting combined with reference dependence supports the theory of “personal equilibrium” where references are based on expectations around optimally planned choices. These results have broad implications for how firms motivate their workers.

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Samuel Dodini
Postdoctoral Fellow in Labor Economics

My broad research interests include the economics of labor markets, incorporating insights from behavioral economics, occupational licensing, monopsony power, education, public finance, and urban economics.