Welfare Economics with Intransitive Revealed Preferences: A Theory of the Endowment Effect
Economists use the standard rational model to predict behavior after a policy change and to determine the policy's welfare implications. Recent experimental observations are casting doubt on the predictive accuracy of the standard model, but the more realistic behavioral alternatives often provide a poor basis for making normative evaluations. This paper suggests that we can still predict behavior and measure welfare within the same model. We show that optimizing agents with standard preferences will in some cases behave as if they are subject to an endowment effect. Even so, we may still be able to uncover information about their preferences. Copyright 2006 Blackwell Publishing Inc..
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 8 (2006)
Issue (Month): 2 (05)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923|
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1097-3923|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lorne Carmichael & W. Bentley MacLeod, 2003. "Caring About Sunk Costs: A Behavioral Solution to Holdup Problems with Small Stakes," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 106-118, April.
- Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
- Ian J. Bateman & Ian H. Langford & Alistair Munro & Chris Starmer & Robert Sugden, 2000. "Estimating Four Hicksian Welfare Measures for a Public Good: A Contingent Valuation Investigation," Land Economics, University of Wisconsin Press, vol. 76(3), pages 355-373.
- Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
- Franciosi, Robert & Kujal, Praveen & Michelitsch, Roland & Smith, Vernon & Deng, Gang, 1996.
"Experimental tests of the endowment effect,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 30(2), pages 213-226, August.
- Shogren, Jason F. & Shin, Seung Youll & Hayes, Dermot J. & Kliebenstein, James, 1994.
"Resolving Differences in Willingness to Pay and Willingness to Accept,"
Staff General Research Papers
701, Iowa State University, Department of Economics.
- Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-70, March.
- Tore Ellingsen, 1997.
"The Evolution of Bargaining Behavior,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 581-602.
- Ellingsen, Tore, 1995. "The Evolution of Bargaining Behavior," SSE/EFI Working Paper Series in Economics and Finance 61, Stockholm School of Economics.
- Herbert Dawid and Bentley MacLeod, 2001. "Holdup and the Evolution of Bargaining Conventions," Computing in Economics and Finance 2001 104, Society for Computational Economics.
- Loomes, Graham & Sugden, Robert, 1983. "A Rationale for Preference Reversal," American Economic Review, American Economic Association, vol. 73(3), pages 428-32, June.
- John Leland, 2010.
"Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies,"
Levine's Working Paper Archive
7644, David K. Levine.
- Leland, Jonathan W, 1994. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Journal of Risk and Uncertainty, Springer, vol. 9(2), pages 151-72, October.
- Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
- Steffen Huck & Georg Kirchsteiger & Joerg Oechssler, 1997.
"Learning to Like What You Have - Explaining the Endowment Effect,"
Game Theory and Information
9702001, EconWPA, revised 15 May 1997.
- Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2005. "Learning to like what you have - explaining the endowment effect," Economic Journal, Royal Economic Society, vol. 115(505), pages 689-702, 07.
- Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2003. "Learning to Like What You Have - Explaining the Endowment Effect," Bonn Econ Discussion Papers bgse5_2003, University of Bonn, Germany.
- Huck, Steffen & Kirchsteiger, Georg & Oechssler, Jörg, 1997. "Learning to like what you have: Explaining the endowment effect," SFB 373 Discussion Papers 1997,38, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Roger B. Myerson, 1999.
"Nash Equilibrium and the History of Economic Theory,"
Journal of Economic Literature,
American Economic Association, vol. 37(3), pages 1067-1082, September.
- R. Myerson., 2010. "Nash Equilibrium and the History of Economic Theory," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
- Ian Bateman & Alistair Munro & Bruce Rhodes & Chris Starmer & Robert Sugden, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 479-505.
When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:8:y:2006:i:2:p:193-218. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.