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

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  • Lucy F. Ackert
  • Bryan K. Church
  • Gerald P. Dwyer

Abstract

The method of elicitation has an important effect on valuations. We investigate the effect of perspective on decision makersâ?? 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 makersâ?? 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 makersâ?? endowments affect their valuations. The results indicate that the disparity between willingness to accept and willingness to pay disappears when decision makersâ?? endowment ensures that they are at least as well off as anonymous others.

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Bibliographic Info

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
Date of revision:
Handle: RePEc:exc:wpaper:2006-28

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