Is the Endowment Effect a Reference Effect?
AbstractThis paper is aimed to assess, with two lab experiments, to what extent Kőszegi and Rabin's (2006) model of expectations-based reference-dependent preferences can explain Knetsch's (1989) endowment effect. Departing from past work, we design an experiment that treats the two goods (a mug and a pen) symmetrically in all but in the probabilities with which they are expected to be owned. Thus, our "endowmentless" endowment effect experiment shuts down all alternative mechanisms while leaving expectations the only difference between treatments. We find no evidence that expectations alone can reproduce any of the original effect.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16715.
Date of creation: Jan 2011
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Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-EXP-2011-01-30 (Experimental Economics)
- NEP-UPT-2011-01-30 (Utility Models & Prospect Theory)
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- Dirk Engelmann & Guillaume Hollard, 2010.
"Reconsidering the Effect of Market Experience on the “Endowment Effect”,"
Econometric Society, vol. 78(6), pages 2005-2019, November.
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- Keith M. Marzilli Ericson & Andreas Fuster, 2011. "Expectations as Endowments: Evidence on Reference-Dependent Preferences from Exchange and Valuation Experiments," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1879-1907.
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- John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
- Knetsch, Jack L. & Wong, Wei-Kang, 2009. "The endowment effect and the reference state: Evidence and manipulations," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 407-413, August.
- Anmol Ratan, 2012. "Mistakes, Closure and Endowment Effect in Laboratory Experiments," Monash Economics Working Papers 22-12, Monash University, Department of Economics.
- Rosato, Antonio, 2013. "Selling Substitute Goods to Loss-Averse Consumers: Limited Availability, Bargains and Rip-offs," MPRA Paper 47168, University Library of Munich, Germany.
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