Department of Economics and Business Economics

Applying for jobs in the lab: The effect of risk attitudes and reference points

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Applying for jobs resembles entering a lottery, where there is an up-front cost of entering and a large potential award gained with some probability. Reference-dependent models predict that the risk attitudes people have toward these types of lotteries will depend on what reference point they use. In this paper, we consider whether a job-application setting in the laboratory can give rise to strong loss aversion and application avoidance. We test for this in a real-effort experiment where we observe application decisions for a job paying a bonus conditional on different levels of an application fee. We also implement a neutral monetary lottery with the same consequential decisions. Our experimental evidence reveals substantial reluctance to take on risk in job applications, but to an extent similar to that found in lottery entry decisions. We do not find support for application avoidance.

Original languageEnglish
JournalJournal of Behavioral and Experimental Economics
Volume79
Issue numberApril
Pages (from-to)165-179
Number of pages15
ISSN2214-8043
DOIs
Publication statusPublished - 2019

    Research areas

  • Application avoidance, Job search, Laboratory experiment, Loss aversion, Reference dependence

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