Date of Award

Summer 2019

Document Type

Open Access Dissertation

Department

Moore School of Business

First Advisor

Donna Bobek Schmitt

Abstract

Prior research finds an individual’s end of year tax position is framed by expectations (e.g., prior year tax position) and withholding position (i.e., refund vs additional taxes due), and suggests individuals concurrently maintain and are influenced by multiple reference points. In this study, I examine a theoretical explanation for how multiple reference points can influence an individual’s decisions even though the shape of the prospect theory value function is based on a single reference point. Specifically, I predict expectations influence decisions through a risky choice framing effect which is caused by diminishing sensitivity in the prospect theory value function while withholding position influences decisions through a goal framing effect which is caused by loss aversion. Moreover, I predict these two framing effects will interact. While I do not find the predicted interaction, experimental results are consistent with my hypotheses regarding the mechanisms underlying the two framing effects, and provide evidence about how multiple reference points can concurrently influence decisions. The results also suggest researchers who use prospect theory should specifically identify whether a hypothesized effect is driven by loss aversion or diminishing sensitivity as the value function could potentially provide multiple alternative explanations for a hypothesized effect.

Available for download on Wednesday, August 18, 2021

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