Advanced Search
MyIDEAS: Login

Learning to Like What You Have - Explaining the Endowment Effect

Contents:

Author Info

  • Steffen Huck
  • Georg Kirchsteiger
  • Jörg Oechssler

Abstract

The endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it. The existence of this effect has been documented in numerous experiments. We attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect. The reason is that an endowment effect improves one's bargaining position in bilateral trades. We show that for a general class of evolutionary processes strictly positive endowment effects will survive in the long run.

Download Info

If 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.
File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse5_2003.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse5_2003.

as in new window
Length: 24
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:bon:bonedp:bgse5_2003

Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: endowment effect; evolution; bargaining;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Heifetz, Aviad & Shannon, Chris & Spiegel, Yossi, 2002. "What to Maximize If You Must," Department of Economics, Working Paper Series qt0300m6q8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Ellingsen, Tore, 1995. "The Evolution of Bargaining Behavior," Working Paper Series in Economics and Finance 61, Stockholm School of Economics.
  4. Ted To, 1999. "Risk and evolution," Economic Theory, Springer, vol. 13(2), pages 329-343.
  5. repec:wop:humbsf:1996-13 is not listed on IDEAS
  6. Knetsch, Jack L & Sinden, J A, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 507-21, August.
  7. R. Cressman & K.H. Schlag, . "The Dynamic (In)Stability of Backwards Induction," ELSE working papers 027, ESRC Centre on Economics Learning and Social Evolution.
  8. Oechssler, Jörg & Riedel, Frank, 2000. "On the dynamic foundation of evolutionary stability in continuous models," SFB 373 Discussion Papers 2000,73, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  9. Rajiv Sethi & E. Somanathan, 1999. "Preference Evolution and Reciprocity," Game Theory and Information 9903001, EconWPA, revised 12 Mar 1999.
  10. S. Huck & J. Oechssler, 1996. "The Indirect Evolutionary Approach To Explaining Fair Allocations," SFB 373 Discussion Papers 1996,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  11. Ely, Jeffrey C. & Yilankaya, Okan, 2001. "Nash Equilibrium and the Evolution of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 255-272, April.
  12. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
  13. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, December.
  14. Oechssler, Jörg & Riedel, Frank, 1998. "Evolutionary dynamics on infinite strategy spaces," SFB 373 Discussion Papers 1998,68, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  15. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
  16. Roth, Alvin E & Murnighan, J Keith, 1982. "The Role of Information in Bargaining: An Experimental Study," Econometrica, Econometric Society, vol. 50(5), pages 1123-42, September.
  17. Knetsch, Jack L & Sinden, J A, 1987. "The Persistence of Evaluation Disparities," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 691-95, August.
  18. Steven F. Venti & David A. Wise, 1990. "But They Don’t Want to Reduce Housing Equity," NBER Chapters, in: Issues in the Economics of Aging, pages 13-32 National Bureau of Economic Research, Inc.
  19. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-84, December.
  20. Werner Güth & Hartmut Kliemt & Bezalel Peleg, 2000. "Co-evolution of Preferences and Information in Simple Games of Trust," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 83-110, 02.
  21. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, January.
  22. repec:wop:humbsf:1996-65 is not listed on IDEAS
  23. Iris Bohnet & Bruno S. Frey & Steffen Huck, . "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers 052, Institute for Empirical Research in Economics - University of Zurich.
  24. Crawford, Vincent P. & Varian, Hal R., 1979. "Distortion of preferences and the Nash theory of bargaining," Economics Letters, Elsevier, vol. 3(3), pages 203-206.
  25. Coursey, Don L & Hovis, John L & Schulze, William D, 1987. "The Disparity between Willingness to Accept and Willingness to Pay Measures of Value," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 679-90, August.
  26. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
  27. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
  28. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2002. "What to Maximize if You Must," Levine's Working Paper Archive 506439000000000063, David K. Levine.
  29. Heifetz, Aviad & Shannon, Chris & Spiegel, Yossi, 2002. "What to Maximize If You Must," Department of Economics, Working Paper Series qt0hj6631n, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  30. H. Lorne Carmichael & W. Bentley MacLeod, 1997. "Territorial Bargaining," Boston College Working Papers in Economics 343., Boston College Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse5_2003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office).

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.