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Abstract

A vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience. One potential shortcoming of this literature is that market experience is endogenous. This study presents a framed field experiment that exogenously induces market experience. Empirical findings support the premise that market experience, alone, can eliminate an important market anomaly

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.313
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Bibliographic Info

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

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 313-17

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:313-17

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Find related papers by JEL classification:

• C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
• D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
• Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

References

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1. List, John & Millimet, Daniel, 2005. "The Market: Catalyst for Rationality and Filter of Irrationality," Departmental Working Papers 0504, Southern Methodist University, Department of Economics.
   
   • John A. List & Daniel L. Millimet, 2008. "The Market: Catalyst for Rationality and Filter of Irrationality," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 47.
   • John List & Daniel Millimet, 2008. "The market: Catalyst for rationality and filter of irrationality," Framed Field Experiments 00179, The Field Experiments Website.
   • John A. List & Daniel Millimet, 2004. "The Market: Catalyst for Rationality and Filter of Irrationality," Levine's Bibliography 122247000000000023, UCLA Department of Economics.
2. Robin Greenwood & Stefan Nagel, 2008. "Inexperienced Investors and Bubbles," NBER Working Papers 14111, National Bureau of Economic Research, Inc.
   
   • Greenwood, Robin & Nagel, Stefan, 2009. "Inexperienced investors and bubbles," Journal of Financial Economics, Elsevier, vol. 93(2), pages 239-258, August.
3. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
   
   • Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
   • John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
4. Simon Gachter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are experimental economists prone to framing effects? A natural field experiment," Natural Field Experiments 00331, The Field Experiments Website.
   
   • Gächter, Simon & Orzen, Henrik & Renner, Elke & Starmer, Chris, 2009. "Are experimental economists prone to framing effects? A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 443-446, June.
   • Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
   • Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
5. Amit Seru & Tyler Shumway & Noah Stoffman, 2010. "Learning by Trading," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 705-739, February.
6. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
7. List, John A. & Rasul, Imran, 2011. "Field Experiments in Labor Economics," Handbook of Labor Economics, Elsevier.
   
   • John List & Imran Rasul, 2010. "Field experiments in labor economics," Artefactual Field Experiments 00092, The Field Experiments Website.
   • John A. List & Imran Rasul, 2010. "Field Experiments in Labor Economics," NBER Working Papers 16062, National Bureau of Economic Research, Inc.
8. repec:feb:framed:0048 is not listed on IDEAS
9. Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the “Endowment Effect”," Econometrica, Econometric Society, vol. 78(6), pages 2005-2019, November.
   
   • Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the "Endowment Effect"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633557, HAL.
10. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
    
    • John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
11. repec:feb:framed:0047 is not listed on IDEAS
12. John List, 2004. "Substitutability, experience, and the value disparity: Evidence from the marketplace," Framed Field Experiments 00175, The Field Experiments Website.
    
    • List, John A., 2004. "Substitutability, experience, and the value disparity: evidence from the marketplace," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 486-509, May.
13. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
    
    • John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, 03.
    • John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments 00174, The Field Experiments Website.
14. Sousa, Yannick Ferreira De & Munro, Alistair, 2012. "Truck, barter and exchange versus the endowment effect: Virtual field experiments in an online game environment," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 482-493.
    
    • Munro, Alistair & Ferreira De Sousa, Yannick, 2008. "Truck, barter and exchange versus the endowment effect: virtual field experiments in an online game environment," MPRA Paper 8977, University Library of Munich, Germany.
15. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.

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Cited by:

1. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.

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