Mistakes, Closure and Endowment Effect in Laboratory Experiments
AbstractIn this paper, we relax the hard closure property of experiments that have been used to study endowment effect in laboratory. We study differences in benchmark environments (hard closure) and an environment that allows participants to reverse the decisions taken in the laboratory (soft closure). We find that “endowment effect” is not observed in the soft closure treatment. The procedures in our experiment allow us to circumvent the critique of altered expectations. Our results call for a careful interpretation of experiments that suggest “endowment effect” in laboratory conditions. Other implications pertain to external validity of experiments with hard closure.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 22-12.
Length: 47 pages
Date of creation: Sep 2012
Date of revision:
Contact details of provider:
Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-CBE-2012-09-30 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-09-30 (Evolutionary Economics)
- NEP-EXP-2012-09-30 (Experimental Economics)
- NEP-UPT-2012-09-30 (Utility Models & Prospect Theory)
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