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The Endowment Effect in the General Population

Author

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  • Dietmar Fehr
  • Dorothea Kübler

Abstract

We study the endowment effect and expectation-based reference points in the field leveraging the setup of the Socio-Economic Panel. Households receive a small item for taking part in the panel, and we randomly assign respondents either a towel or a notebook, which they can exchange at the end of the interview. We observe a trading rate of 32 percent, consistent with an endowment effect, but no relationship with loss aversion. Manipulating expectations of the exchange opportunity, we find no support for expectation-based reference points. However, trading predicts residential mobility and is related to stock-market participation, i.e., economic decisions that entail parting with existing resources.

Suggested Citation

  • Dietmar Fehr & Dorothea Kübler, 2022. "The Endowment Effect in the General Population," CESifo Working Paper Series 10150, CESifo.
    • Handle: RePEc:ces:ceswps:_10150
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    References listed on IDEAS

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    1. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    2. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    3. David Richter & Jürgen Schupp, 2015. "The SOEP Innovation Sample (SOEP IS)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 135(3), pages 389-400.
    4. Michael L. Anderson & Jeremy Magruder, 2017. "Split-Sample Strategies for Avoiding False Discoveries," NBER Working Papers 23544, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Changkuk Im, 2023. "Accurate Quality Elicitation in a Multi-Attribute Choice Setting," Papers 2309.00114, arXiv.org, revised Dec 2023.

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    More about this item

    Keywords

    exchange asymmetry; reference-dependent preferences; loss aversion; field experiment; SOEP;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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