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When the Shoe is on the Other Foot: Experimental Evidence on Valuation Disparities

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Author Info
Lucy F. Ackert
Bryan K. Church
Gerald P. Dwyer

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Abstract

The method of elicitation has an important effect on valuations. We investigate the effect of perspective on decision makers’ elicited values. We conduct experimental sessions in which participants act as sellers or buyers and replicate the disparity between willingness to accept and willingness to pay: sellers want to collect more and buyers want to pay less. We conduct additional sessions in which endowed decision makers provide values that are used to determine a price at which anonymous others transact. In these sessions, decision makers’ experimental earnings are not affected by valuations, but rather determined by their endowment. Decision makers appear to consider their standing relative to anonymous others in providing valuations, i.e., decision makers’ endowments affect their valuations. The results indicate that the disparity between willingness to accept and willingness to pay disappears when decision makers’ endowment ensures that they are at least as well off as anonymous others.

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Paper provided by Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University in its series Experimental Economics Center Working Paper Series with number 2006-28.

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Length: 24
Date of creation: Jun 2006
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Handle: RePEc:exc:wpaper:2006-28

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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  7. Bradley J. Ruffle & Orit Tykocinski, 2000. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 319-324, March. [Downloadable!] (restricted)
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  14. Van Boven, Leaf & Loewenstein, George & Dunning, David, 2003. "Mispredicting the endowment effect:: Underestimation of owners' selling prices by buyer's agents," Journal of Economic Behavior & Organization, Elsevier, vol. 51(3), pages 351-365, July. [Downloadable!] (restricted)
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  18. Waldfogel, Joel, 1998. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 88(5), pages 1358-59, December. [Downloadable!] (restricted)
    Other versions:
  19. Sara J. Solnick & David Hemenway, 2000. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 90(1), pages 325-325, March. [Downloadable!] (restricted)
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