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Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations

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  • Fabio Tufano

Abstract

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when – by design – individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.
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  • Fabio Tufano, 2010. "Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 1-13, March.
    • Handle: RePEc:kap:expeco:v:13:y:2010:i:1:p:1-13
    DOI: 10.1007/s10683-009-9226-8
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    References listed on IDEAS

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    1. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
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    5. Richard H. Thaler & Cass R. Sunstein, 2023. "Libertarian paternalism," Chapters, in: Cass R. Sunstein & Lucia A. Reisch (ed.), Research Handbook on Nudges and Society, chapter 1, pages 10-16, Edward Elgar Publishing.
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    Keywords

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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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