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Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience

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  • John A. 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16908.

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Date of creation: Mar 2011
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:16908

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  1. John List & Daniel Millimet, 2008. "The market: Catalyst for rationality and filter of irrationality," Framed Field Experiments, The Field Experiments Website 00179, The Field Experiments Website.
  2. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers, National Bureau of Economic Research, Inc 9736, National Bureau of Economic Research, Inc.
  3. Gächter, Simon & Orzen, Henrik & Renner, Elke & Starmer, Chris, 2009. "Are experimental economists prone to framing effects? A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 70(3), pages 443-446, June.
  4. John List & Imran Rasul, 2010. "Field experiments in labor economics," Artefactual Field Experiments, The Field Experiments Website 00092, The Field Experiments Website.
  5. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments, The Field Experiments Website 00058, The Field Experiments Website.
  6. 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.
  7. List, John A., 2004. "Substitutability, experience, and the value disparity: evidence from the marketplace," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 47(3), pages 486-509, May.
  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 hal-00633557, HAL.
  9. repec:feb:framed:0070 is not listed on IDEAS
  10. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(1), pages 41-71, February.
  11. 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.
  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. 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.
  15. 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.
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Cited by:
  1. 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.
  2. 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.
  3. Lindsey, Robin, 2010. "State-dependent congestion pricing with reference-dependent preferences," Working Papers, University of Alberta, Department of Economics 2010-4, University of Alberta, Department of Economics.
  4. Fabian Herweg & Heiko Karle & Daniel Müller, 2014. "Incomplete Contracting, Renegotiation, and Expectation-Based Loss Aversion," CESifo Working Paper Series, CESifo Group Munich 4687, CESifo Group Munich.
  5. 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.

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