Reconsidering the Effect of Market Experience on the "Endowment Effect"
AbstractSimple exchange experiments have revealed that participants trade their endowment less frequently than standard demand theory would predict. List (2003a) ﬁnds that the most experienced dealers acting in a well-functioning market are not subject to this exchange asymmetry, suggesting that a signiﬁcant amount of market experience is required to overcome it. In order to understand this market-experience effect, we introduce a distinction between two types of uncertainty, choice uncertainty and trade uncertainty, both of which could lead to exchange asymmetry. We conjecture that trade uncertainty is most important for exchange asymmetry. To test this conjecture, we design an experiment where the two treatments impact diﬀerently on trade uncertainty, while controlling for choice uncertainty. Supporting our conjecture, we ﬁnd that "forcing" subjects to give away their endowment in a series of exchanges eliminates exchange asymmetry in a subsequent test. We discuss why markets might not provide sufficient incentives for learning to overcome exchange asymmetry.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633557.
Date of creation: 2010
Date of revision:
Publication status: Published, Econometrica, 2010, 78, 6, 2005-2019
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00633557
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Endowment effect; exchange asymmetry; market experience;
Other versions of this item:
- Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the “Endowment Effect”," Econometrica, Econometric Society, vol. 78(6), pages 2005-2019, November.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John List, 2004.
"Neoclassical theory versus prospect theory: Evidence from the marketplace,"
Framed Field Experiments
00174, The Field Experiments Website.
- John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, 03.
- John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
- John A. List, 2003.
"Does Market Experience Eliminate Market Anomalies?,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(1), pages 41-71, February.
- John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
- Seidl, Christian, 2002. " Preference Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 621-55, December.
- Kingsley, David C. & Brown, Thomas C., 2013. "Value learning and the willingness to accept–willingness to pay disparity," Economics Letters, Elsevier, vol. 120(3), pages 473-476.
- Steven J Humphrey & Luke Lindsay & Chris Starmer, 2012. "Consumption experience, choice experience and the endowment effect," Discussion Papers 2012-16, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- John A. List, 2011.
"Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience,"
American Economic Review,
American Economic Association, vol. 101(3), pages 313-17, May.
- John List, 2011. "Does market experience eliminate market anomalies? The case of exogenous market experience," Framed Field Experiments 00178, The Field Experiments Website.
- John A. List, 2011. "Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience," NBER Working Papers 16908, National Bureau of Economic Research, Inc.
- Stephens, Thomas A & Tyran, Jean-Robert, 2012.
"“At least I didn’t lose money” Nominal Loss Aversion Shapes Evaluations of Housing Transactions,"
CEPR Discussion Papers
9198, C.E.P.R. Discussion Papers.
- Thomas A. Stephens & Jean-Robert Tyran, 2012. "“At least I didn’t lose money” - Nominal Loss Aversion Shapes Evaluations of Housing Transactions," Discussion Papers 12-14, University of Copenhagen. Department of Economics.
- Anmol Ratan, 2012. "Mistakes, Closure and Endowment Effect in Laboratory Experiments," Monash Economics Working Papers 22-12, Monash University, Department of Economics.
- Ori Heffetz & John A. List, 2011. "Is the Endowment Effect a Reference Effect?," NBER Working Papers 16715, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.