IDEAS home Printed from https://ideas.repec.org/a/aea/aejmic/v11y2019i1p185-207.html
   My bibliography  Save this article

Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences

Author

Listed:
  • Annette Cerulli-Harms
  • Lorenz Goette
  • Charles Sprenger

Abstract

We test expectations-based reference dependence in market experiments with probabilistic forced exchange. Koszegi and Rabin (2006) predict that when the probability of forced exchange increases, individuals cannot expect to stick with the status quo, and should grow more willing to exchange. This mechanism may eliminate and even reverse the "endowment effect" (Knetsch and Sinden 1984; Kahneman, Knetsch, and Thaler 1990). In a series of experiments with overall 930 subjects, we show some tentative support for the notion that attitudes toward exchange are influenced by the probability of forced exchange. However, the results are sensitive to small changes in experimental design.

Suggested Citation

  • Annette Cerulli-Harms & Lorenz Goette & Charles Sprenger, 2019. "Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences," American Economic Journal: Microeconomics, American Economic Association, vol. 11(1), pages 185-207, February.
    • Handle: RePEc:aea:aejmic:v:11:y:2019:i:1:p:185-207
    Note: DOI: 10.1257/mic.20170271
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mic.20170271
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=0hW8wns0KLntgJyg_EakQkvdOPo_sY18
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=kFXzn97RMEuih6NNPHgn-hs5QcF2vdHT
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=gbDJ3JVA20tKTEVNxdG7-gzGzV_hUPVG
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cédric Argenton & Xiaoyu Wang, 2023. "Litigation and settlement under loss aversion," European Journal of Law and Economics, Springer, vol. 56(2), pages 369-402, October.
    2. Clist, Paul & D’Exelle, Ben & Verschoor, Arjan, 2021. "An endowment effect for risk levels: Evidence from a Ugandan lab," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 297-310.
    3. Benjamin Balzer & Antonio Rosato & Jonas von Wangenheim, 2020. "Dutch versus First-Price Auctions with Dynamic Expectations-Based Reference-Dependent Preferences," Working Paper Series 2020/05, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    4. Kelvin Mashisia Shikuku & Erwin Bulte & Carl Johan Lagerkvist & Nhuong Tran, 2023. "Endowments, expectations, and the value of food safety certification: experimental evidence from fish markets in Nigeria," Experimental Economics, Springer;Economic Science Association, vol. 26(5), pages 1060-1084, November.
    5. Heffetz, Ori, 2021. "Are reference points merely lagged beliefs over probabilities?," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 252-269.
    6. Balzer, Benjamin & Rosato, Antonio & von Wangenheim, Jonas, 2022. "Dutch vs. first-price auctions with expectations-based loss-averse bidders," Journal of Economic Theory, Elsevier, vol. 205(C).
    7. Lucas C. Coffman, 2019. "Expectations do not affect punishment," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 5(2), pages 182-196, December.
    8. Gagnon-Bartsch, Tristan & Bushong, Benjamin, 2022. "Learning with misattribution of reference dependence," Journal of Economic Theory, Elsevier, vol. 203(C).
    9. Wei-Hsiang Lin & Justin L Gardner & Shih-Wei Wu, 2020. "Context effects on probability estimation," PLOS Biology, Public Library of Science, vol. 18(3), pages 1-45, March.

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:11:y:2019:i:1:p:185-207. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.