Expectations or rational expectations? A theory of systematic goal deviation

Young, B

Expectations or rational expectations? A theory of systematic goal deviation

Young, B

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Journal of Economic Behavior and Organization, 2024, 219, pp. 25-37
Issue Date:: 2024-03-01

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Field	Value	Language
dc.contributor.author	Young, B https://orcid.org/0000-0002-5166-7046
dc.date.accessioned	2025-01-21T00:28:10Z
dc.date.available	2025-01-21T00:28:10Z
dc.date.issued	2024-03-01
dc.identifier.citation	Journal of Economic Behavior and Organization, 2024, 219, pp. 25-37
dc.identifier.issn	0167-2681
dc.identifier.uri	http://hdl.handle.net/10453/183896
dc.description.abstract	A planner uses goals to manage a preference disagreement over effort provision with a doer. Goals set output expectations for the doer which affect her behavior due to reference-dependent, loss-averse preferences over output. We characterize the planner's optimal goal and explore when it is aspirational versus achievable. Specifically, we show that the optimal goal is achieved by the doer only if the extent of preference disagreement is relatively small. Instead, when the extent of preference disagreement is large, the doer falls short of the optimal goal. The stochasticity of output plays an important role in generating this prediction within our model.
dc.language	en
dc.publisher	Elsevier
dc.relation.ispartof	Journal of Economic Behavior and Organization
dc.relation.isbasedon	10.1016/j.jebo.2024.01.003
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1401 Economic Theory, 1402 Applied Economics, 1403 Econometrics
dc.subject.classification	Economics
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	3801 Applied economics
dc.title	Expectations or rational expectations? A theory of systematic goal deviation
dc.type	Journal Article
utslib.citation.volume	219
utslib.for	1401 Economic Theory
utslib.for	1402 Applied Economics
utslib.for	1403 Econometrics
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Economics Discipline
pubs.organisational-group	University of Technology Sydney/UTS Groups
pubs.organisational-group	University of Technology Sydney/UTS Groups/Centre for Behavioural Science and Policy Design (CBSPD)
pubs.organisational-group	University of Technology Sydney/UTS Groups/Behavioural-Lab (BL)
utslib.copyright.status	open_access	*
dc.rights.license	This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). To view a copy of this license, visit https://creativecommons.org/licenses/by/4.0/
dc.date.updated	2025-01-21T00:28:09Z
pubs.publication-status	Published
pubs.volume	219

Abstract:

A planner uses goals to manage a preference disagreement over effort provision with a doer. Goals set output expectations for the doer which affect her behavior due to reference-dependent, loss-averse preferences over output. We characterize the planner's optimal goal and explore when it is aspirational versus achievable. Specifically, we show that the optimal goal is achieved by the doer only if the extent of preference disagreement is relatively small. Instead, when the extent of preference disagreement is large, the doer falls short of the optimal goal. The stochasticity of output plays an important role in generating this prediction within our model.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/183896