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Experimental tests of the endowment effect

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  • Franciosi, Robert
  • Kujal, Praveen
  • Michelitsch, Roland
  • Smith, Vernon

Abstract

The discrepancy between WTA and WTP is supposed to be a manifestation of the endowment effect (KKT). The discrepancy between the average WTA-WTP disappears in the sense of statistical significance (Shogren et. at.) in settings with repeated interactions. In this paper we reexamine the KKT experimental procedures for identifying an endowment effect for consumer goods. No evidence of income or role effects is found. We show that even though the discrepancy between WTA-WTP diminishes undertrading can still persist in markets.

Suggested Citation

  • Franciosi, Robert & Kujal, Praveen & Michelitsch, Roland & Smith, Vernon, 1994. "Experimental tests of the endowment effect," UC3M Working papers. Economics 2915, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:2915
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    References listed on IDEAS

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    1. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
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    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Don L. Coursey & John L. Hovis & William D. Schulze, 1987. "The Disparity Between Willingness to Accept and Willingness to Pay Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 679-690.
    5. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
    6. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-270, March.
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    Keywords

    Willingness to Accept;

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