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Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations

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  • Fabio Tufano

Abstract

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when – by design – individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.
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  • Fabio Tufano, 2010. "Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 1-13, March.
    • Handle: RePEc:kap:expeco:v:13:y:2010:i:1:p:1-13
    DOI: 10.1007/s10683-009-9226-8
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    1. Glenn W. Harrison & Ronald M. Harstad & E. Elisabet Rutstr–m, 2004. "Experimental Methods and Elicitation of Values," Experimental Economics, Springer;Economic Science Association, vol. 7(2), pages 123-140, June.
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    5. Cooper, David & Rege, Mari, 2008. "Social Interaction Effects and Choice Under Uncertainty. An Experimental Study," UiS Working Papers in Economics and Finance 2009/24, University of Stavanger.
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    More about this item

    Keywords

    Auctions; Valuations; Economic principles; Anomalies; Experiments; Social interactions; C92; D01; D44;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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