Experimental Tests of the Endowment Effect and the Coase Theorem
AbstractContrary to theoretical expectations, measures of willingness-to-accept greatly exceed measures of willingness-to-pay. This paper reports several experiments that demonstrate that this "endowment effect" persists even in market settings with opportunities to learn. Consumption objects (e.g., coffee mugs) are randomly given to half the subjects in an experiment. Markets for the mugs are then conducted. The Coase theorem predicts that about half the mugs will trade, but observed volume is always significantly less. When markets for "induced-value" tokens are conducted, the predicted volume is observed, suggesting that transactions costs cannot explain the undertrading for consumption goods. Copyright 1990 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 98 (1990)
Issue (Month): 6 (December)
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- > Game Theory > Experimental Economics
- > Environmental and Natural Resource Economics > Environmental Economics > Valuation > Contingent valuation method > Willingness to pay versus willingness to accept
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