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WTP vs. WTA: Christmas Presents and the Endowment Effect

Author

Listed:
  • Bauer Thomas K.

    (RWI Essen, Hohenzollernstr. 1-3, 45128 Essen, Germany; and Ruhr- Universität Bochum, IZA Bonn)

  • Schmidt Christoph M.

    (RWI Essen, Hohenzollernstr. 1-3, 45128 Essen, Germany; and Ruhr-Universität Bochum, IZA Bonn, and CEPR London)

Abstract

Using data on the valuation of Christmas gifts received by students enrolled in different fields at a German university, we investigate whether the endowment effect, the difference between asking and bidding prices, differs between males and females, students of economics and other fields and whether it varies with the market price of the object under consideration. Our estimation results suggest that female students display a significantly higher endowment effect, indicating that experimental studies on the endowment effect are highly sensitive towards the choice of the subject pool. The results further indicate that the endowment effect depends on the market price of the object. Finally, even though the point estimates hint towards both, a lower WTP and WTA of economic students, these differences are not statistically significant at conventional levels.

Suggested Citation

  • Bauer Thomas K. & Schmidt Christoph M., 2012. "WTP vs. WTA: Christmas Presents and the Endowment Effect," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(1), pages 4-11, February.
    • Handle: RePEc:jns:jbstat:v:232:y:2012:i:1:p:4-11
    DOI: 10.1515/jbnst-2012-0103
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    References listed on IDEAS

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    1. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 507-521.
    2. Michael S. Haigh & John A. List, 2005. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Journal of Finance, American Finance Association, vol. 60(1), pages 523-534, February.
    3. List, John A. & Shogren, Jason F., 2002. "Calibration of Willingness-to-Accept," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 219-233, March.
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    5. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-1336, December.
    6. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    7. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 41-71.
    8. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-1355, December.
    9. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    10. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
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    Cited by:

    1. Laura Birg & Anna Goeddeke, 2016. "Christmas Economics—A Sleigh Ride," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1980-1984, October.
    2. Birg, Laura & Pommeranz, Simon, 2018. "The deadweight loss of christmas - Reply," University of Göttingen Working Papers in Economics 361, University of Goettingen, Department of Economics.
    3. Parag Waknis & Ajit Gaikwad, 2017. "The Deadweight Loss of Diwali: A Developing Country Perspective on Economics of Gift Giving," Economics Bulletin, AccessEcon, vol. 37(1), pages 530-538.
    4. Vic Benuyenah, 2021. "Face-saving and Seasonal Gifts: Analysis of Cultural Exchanges in the Confucian Market Place," International Review of Management and Marketing, Econjournals, vol. 11(2), pages 59-66.

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    More about this item

    Keywords

    Loss aversion; endowment effect; Christmas presents; deadweight loss; bidding price; asking price;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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