Goals as Reference Points

It is argued that goals serve as reference points and alter outcomes in a manner consistent with the value function of Prospect Theory and is used to explain previous empirical results in the goal literature on affect, effort, persistence, and performance.

Abstract

We argue that goals serve as reference points and alter outcomes in a manner consistent with the value function of Prospect Theory (Kahneman & Tversky, 1979; Tversky & Kahneman, 1992). We present new evidence that goals inherit the properties of the value function-not only a reference point, but also loss aversion and diminishing sensitivity. We also use the value function to explain previous empirical results in the goal literature on affect, effort, persistence, and performance.