Article

Theory and Decision

, Volume 75, Issue 2, pp 193-210

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Aspirations as reference points: an experimental investigation of risk behavior over time

  • Arvid O. I. HoffmannAffiliated withDepartment of Finance, School of Business and Economics, Maastricht UniversityNetwork for Studies on Pensions, Aging and Retirement (Netspar) Email author 
  • , Sam F. HenryAffiliated withDepartment of Finance, School of Business and Economics, Maastricht University
  • , Nikos KalogerasAffiliated withDepartment of Marketing and Supply Chain Management, School of Business and Economics, Maastricht UniversityEuropean Center of Corporate Engagement (ECCE), School of Business and Economics, Maastricht University

Abstract

This paper examines the importance of aspirations as reference points in a multi-period decision-making context. After stating their personal aspiration level, 172 individuals made six sequential decisions among risky prospects as part of a choice experiment. The results show that individuals make different risky-choices in a multi-period compared to a single-period setting. In particular, individuals’ aspiration level is their main reference point during the early stages of decision-making, while their starting status (wealth level at the start of the experiment) becomes the central reference point during the later stages of their multi-period decision-making.

Keywords

Aspirations Multi-period decision-making Reference points Risk-behavior Risky-choice