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

  • John A. List

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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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.313
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 313-17

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:313-17
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  1. Amit Seru & Tyler Shumway & Noah Stoffman, 2010. "Learning by Trading," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 705-739, February.
  2. Daniel Millimet & John List, 2008. "The market: Catalyst for rationality and filter of irrationality," Framed Field Experiments 00179, The Field Experiments Website.
  3. List, John A., 2004. "Substitutability, experience, and the value disparity: evidence from the marketplace," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 486-509, May.
  4. John A. List & Imran Rasul, 2010. "Field Experiments in Labor Economics," NBER Working Papers 16062, National Bureau of Economic Research, Inc.
  5. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
  6. John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments 00174, The Field Experiments Website.
  7. Lei Feng & Mark Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Springer, vol. 9(3), pages 305-351, 09.
  8. Greenwood, Robin & Nagel, Stefan, 2009. "Inexperienced investors and bubbles," Journal of Financial Economics, Elsevier, vol. 93(2), pages 239-258, August.
  9. Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  10. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
  11. David Reiley & John List, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  12. 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.
  13. Bateman, Ian J, et al, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 479-505, May.
  14. Munro, Alistair & Ferreira De Sousa, Yannick, 2008. "Truck, barter and exchange versus the endowment effect: virtual field experiments in an online game environment," MPRA Paper 8977, University Library of Munich, Germany.
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