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Does market experience eliminate market anomalies? The case of exogenous market experience

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  • John List

Abstract

A vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience. One potential shortcoming of this literature is that market experience is endogenous. This study presents a framed field experiment that exogenously induces market experience. Empirical findings support the premise that market experience, alone, can eliminate an important market anomaly.

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Bibliographic Info

Paper provided by The Field Experiments Website in its series Framed Field Experiments with number 00178.

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Date of creation: 2011
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Handle: RePEc:feb:framed:00178

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Web page: http://www.fieldexperiments.com

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  1. repec:feb:framed:0070 is not listed on IDEAS
  2. John A. List & Imran Rasul, 2010. "Field Experiments in Labor Economics," NBER Working Papers 16062, National Bureau of Economic Research, Inc.
  3. Sousa, Yannick Ferreira De & Munro, Alistair, 2012. "Truck, barter and exchange versus the endowment effect: Virtual field experiments in an online game environment," Journal of Economic Psychology, Elsevier, Elsevier, vol. 33(3), pages 482-493.
  4. Lei Feng & Mark Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Springer, Springer, vol. 9(3), pages 305-351, 09.
  5. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, INFORMS, vol. 52(5), pages 726-740, May.
  6. Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  7. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments, The Field Experiments Website 00297, The Field Experiments Website.
  8. Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the "Endowment Effect"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00633557, HAL.
  9. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  10. John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments, The Field Experiments Website 00174, The Field Experiments Website.
  11. List John A. & Millimet Daniel L, 2008. "The Market: Catalyst for Rationality and Filter of Irrationality," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-55, November.
  12. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 479-505, May.
  13. Greenwood, Robin & Nagel, Stefan, 2009. "Inexperienced investors and bubbles," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(2), pages 239-258, August.
  14. List, John A., 2004. "Substitutability, experience, and the value disparity: evidence from the marketplace," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 486-509, May.
  15. Amit Seru & Tyler Shumway & Noah Stoffman, 2010. "Learning by Trading," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 23(2), pages 705-739, February.
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Cited by:
  1. Munro, Alistair & Ferreira De Sousa, Yannick, 2008. "Truck, barter and exchange versus the endowment effect: virtual field experiments in an online game environment," MPRA Paper 8977, University Library of Munich, Germany.
  2. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 45(10), pages 1501-1526.
  3. Fabian Herweg & Heiko Karle & Daniel Müller, 2014. "Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion," CESifo Working Paper Series 4687, CESifo Group Munich.
  4. Börjesson, Maria & Eliasson, Jonas, 2014. "Experiences from the Swedish Value of Time study," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 59(C), pages 144-158.
  5. Chang, Tom & Gross, Tal, 2014. "How many pears would a pear packer pack if a pear packer could pack pears at quasi-exogenously varying piece rates?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 99(C), pages 1-17.

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