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Preference reversals and disparities between willingness to pay and willingness to accept in repeated markets

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Author Info
Graham Loomes (School of Economics, University of East Anglia)
Chris Starmer (School of Economics, University of Nottingham)
Robert Sugden () (School of Economics, University of East Anglia)

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Abstract

Previous studies suggest that two otherwise robust ‘anomalies’ – preference reversals and disparities between buying and selling valuations – are eroded when respondents participate in repeated markets. We report an experiment which investigates whether this is true when factors neglected in previous studies are controlled, and which distinguishes between anomalies revealed in the behaviour of individual market participants and anomalies revealed in market prices. Our results confirm the decay of buy/sell disparities, but not of preference reversal. This raises doubts about the hypothesis that, in general, repeated markets reveal anomaly-free preferences, even among the marginal traders who determine prices.

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Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2007-10.

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Date of creation: Nov 2007
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Handle: RePEc:cdx:dpaper:2007-10

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Related research
Keywords: preference reversal; willingness to accept; willingness to pay; repeated market.;

Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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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.:
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    Other versions:
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    Other versions:
  18. David J. Butler & Graham C. Loomes, 2007. "Imprecision as an Account of the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 97(1), pages 277-297, March. [Downloadable!]
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