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WTP vs. WTA: Christmas Presents and the Endowment Effect

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Author Info
Bauer, Thomas () (RWI Essen)
Schmidt, Christoph M. () (RWI Essen)

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Abstract

Using data on the valuation of Christmas gifts received by students in different fields at a German university, we investigate whether the endowment effect differs between students of economics and other respondents and whether it varies with the market price of the object under consideration. Our estimation results suggest that economics students have both, a significant lower WTP and WTA, indicating that existing studies on the efficiency loss of holiday gifts and experimental studies on the endowment effect that rely on data from economics students may be biased. The result further indicates that the endowment effect is independent of the market price of the object.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3855.

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Length: 13 pages
Date of creation: Nov 2008
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Handle: RePEc:iza:izadps:dp3855

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Related research
Keywords: loss aversion; endowment effect; Christmas presents; deadweight loss;

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Find related papers by JEL classification:
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D49 - Microeconomics - - Market Structure and Pricing - - - Other
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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  1. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-55, December. [Downloadable!] (restricted)
  2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December. [Downloadable!] (restricted)
  3. Michael S. Haigh & John A. List, 2005. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Journal of Finance, American Finance Association, vol. 60(1), pages 523-534, 02. [Downloadable!] (restricted)
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  4. Knetsch, Jack L & Sinden, J A, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 507-21, August. [Downloadable!] (restricted)
  5. List, John A. & Shogren, Jason F., 2002. "Calibration of Willingness-to-Accept," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 219-233, March. [Downloadable!] (restricted)
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  6. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2007. "Individual-Level Loss Aversion in Riskless and Risky Choices," IZA Discussion Papers 2961, Institute for the Study of Labor (IZA). [Downloadable!]
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