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Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience

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  • John A. List

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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  1. 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.
  2. 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.
  3. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  4. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
  5. 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.
  6. 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.
  7. John A. List & Imran Rasul, 2010. "Field Experiments in Labor Economics," NBER Working Papers 16062, National Bureau of Economic Research, Inc.
  8. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
  9. Robin Greenwood & Stefan Nagel, 2008. "Inexperienced Investors and Bubbles," NBER Working Papers 14111, National Bureau of Economic Research, Inc.
  10. repec:feb:framed:0070 is not listed on IDEAS
  11. List, John & Millimet, Daniel, 2005. "The Market: Catalyst for Rationality and Filter of Irrationality," Departmental Working Papers 0504, Southern Methodist University, Department of Economics.
  12. 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.
  13. 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.
  14. 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.
  15. Lei Feng & Mark Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Springer, vol. 9(3), pages 305-351, 09.
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Cited by:
  1. 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.
  2. Lindsey, Robin, 2010. "State-dependent congestion pricing with reference-dependent preferences," Working Papers 2010-4, University of Alberta, Department of Economics.
  3. Chang, Tom & Gross, Tal, 2014. "How many pears would a pear packer pack if a pear packer could pack pears at quasi-exogenously varying piece rates?," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 1-17.
  4. Börjesson, Maria & Eliasson, Jonas, 2014. "Experiences from the Swedish Value of Time study," Transportation Research Part A: Policy and Practice, Elsevier, vol. 59(C), pages 144-158.
  5. Fabian Herweg & Heiko Karle & Daniel Müller, 2014. "Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion," CESifo Working Paper Series 4687, CESifo Group Munich.

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