The Endowment Effect and Expected Utility
AbstractThe endowment effect, which is well documented in the contingent valuation literature, alters people's preferences according to a reference point established in an elicitation question. In particular, the utility that people place on a bundle is both a positive function of the quantities of the goods comprising the bundle, and a negative function of any loss (real or hypothetical) that the elicitation question asks them to incur. Biases such as this have lead some to reject the contingent valuation method as a means of quantifying costs and benefits in favour of other methods of preference elicitation such as standard gambles. But, most preference elicitation methods used by economists require people to express their preferences for one good in terms of their willingness to forego some of another good. Consequently, it is reasonable to expect that, and prudent to check whether, an endowment effect is also evident in other methods of preference elicitation such as von Neumann-Morgenstern's standard gambles. Internal inconsistencies in the standard gamble method from the experimental economics literature and from a study into the value of non-fatal road injuries are shown to be evidence that an endowment effect is also at work in standard gambles. Copyright 2000 by Scottish Economic Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.
Volume (Year): 47 (2000)
Issue (Month): 2 (May)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0036-9292
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Anne Spencer, 2001. "The Time Trade-Off Method: An Exploratory Study," Working Papers 437, Queen Mary, University of London, School of Economics and Finance.
- Chen Li & Zhihua Li & Peter Wakker, 2014. "If nudge cannot be applied: a litmus test of the readers’ stance on paternalism," Theory and Decision, Springer, vol. 76(3), pages 297-315, March.
- Han Bleichrodt & Jose María Abellán Perpiñán & Jose Luis Pinto-Prades & Ildefonso Méndez-Martínez, 2006.
"Resolving Inconsistencies in Utility Measurement under Risk: Tests of Generalizations of Expected Utility,"
06.19, Universidad Pablo de Olavide, Department of Economics.
- Han Bleichrodt & Jose Maria Abellan-Perpiñan & Jose Luis Pinto-Prades & Ildefonso Mendez-Martinez, 2007. "Resolving Inconsistencies in Utility Measurement Under Risk: Tests of Generalizations of Expected Utility," Management Science, INFORMS, vol. 53(3), pages 469-482, March.
- Han Bleichrodt & José María Abellán-Perpiñan & JoséLuis Pinto & Ildefonso Méndez-Martínez, 2005. "Resolving inconsistencies in utility measurement under risk: Tests of generalizations of expected utility," Economics Working Papers 798, Department of Economics and Business, Universitat Pompeu Fabra.
- Mandy Ryan & Cristina Ubach, 2003. "Testing for an experience endowment effect in health care," Applied Economics Letters, Taylor & Francis Journals, vol. 10(7), pages 407-410.
- Ulrich Schmidt, 2012. "Insurance Demand and Prospect Theory," Kiel Working Papers 1750, Kiel Institute for the World Economy.
- Mann, Stefan, 2003. "Die Expertenbewertung als Alternative zur Kontingenzbewertung," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(8).
- Abellan-Perpiñan, Jose Maria & Bleichrodt, Han & Pinto-Prades, Jose Luis, 2009. "The predictive validity of prospect theory versus expected utility in health utility measurement," Journal of Health Economics, Elsevier, vol. 28(6), pages 1039-1047, December.
- Kuznar, Lawrence A. & Frederick, William G., 2003. "Environmental constraints and sigmoid utility: implications for value, risk sensitivity, and social status," Ecological Economics, Elsevier, vol. 46(2), pages 293-306, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.