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The Willingness to Pay--Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Reply

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  • Charles R. Plott
  • Kathryn Zeiler
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    Abstract

    Isoni, Loomes, and Sugden (2011) assert that Plott and Zeiler (2005) reported inaccurate results. Placing ILS's selective quotes into context demonstrates otherwise. Additionally, examining the data closely yields three conclusions. First, all mug data reject endowment effect theory. Second, lottery gaps are associated with unstable attitudes toward uncertainty, a finding consistent with PZ's (2005) lottery data description, explicit warnings about procedure limitations and the data supplement, which reports the lottery data and cautions. Third, lottery outcome beliefs are influenced by whether WTP or WTA is reported, suggesting that changing beliefs, as opposed to the shape of preferences, produce lottery gaps. (JEL C91)

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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 101 (2011)
    Issue (Month): 2 (April)
    Pages: 1012-28

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    Handle: RePEc:aea:aecrev:v:101:y:2011:i:2:p:1012-28

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    References

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    1. David Genesove & Christopher Mayer, . "Loss Aversion and Seller Behavior: Evidence from the Housing Market," Zell/Lurie Center Working Papers 323, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    2. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
    3. Kovalchik, Stephanie & Camerer, Colin F. & Grether, David M. & Plott, Charles R. & Allman, John M., 2003. "Aging and decision making: A comparison between neurologically healthy elderly and young individuals," Working Papers 1180, California Institute of Technology, Division of the Humanities and Social Sciences.
    4. Sugden, Robert, 2003. "Reference-dependent subjective expected utility," Journal of Economic Theory, Elsevier, vol. 111(2), pages 172-191, August.
    5. Jack Knetsch & Fang-Fang Tang & Richard Thaler, 2001. "The Endowment Effect and Repeated Market Trials: Is the Vickrey Auction Demand Revealing?," Experimental Economics, Springer, vol. 4(3), pages 257-269, December.
    6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
    7. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
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    Cited by:
    1. Isabel Marcin & Andreas Nicklisch, 2014. "Testing the Endowment Effect for Default Rules," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2014_01, Max Planck Institute for Research on Collective Goods.
    2. Lunn,Pete & Lunn, Mary, 2014. "What Can I Get For It? The Relationship Between the Choice Equivalent, Willingness to Accept and Willingness to Pay," Papers WP479, Economic and Social Research Institute (ESRI).

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