IDEAS home Printed from https://ideas.repec.org/a/spr/jesaex/v3y2017i2d10.1007_s40881-017-0044-z.html
   My bibliography  Save this article

Consumption experience, choice experience and the endowment effect

Author

Listed:
  • Steven J. Humphrey

    (University of Osnabrück)

  • Luke Lindsay

    (University of Exeter)

  • Chris Starmer

    (School of Economics, University of Nottingham)

Abstract

We report experiments investigating how experience influences the endowment effect. Our experiments feature endowments which are bundles of unfamiliar consumption goods. We examine how a subject’s willingness to swap items from their endowment is influenced by prior experiences of tasting the goods in question and by prior experiences of choosing between them. We do not find a statistically significant endowment effect in our baseline treatment and, because of this, we are unable to test for an effect of consumption experience. We do find an endowment effect when the endowment is acquired in two instalments and, in this setting, we find some evidence that choice experience increases trading. In a follow-up experiment, we find evidence that the absence of an endowment effect in our baseline treatment is due to subjects being more willing to swap when they do not have to give up the last unit of their endowment.

Suggested Citation

  • Steven J. Humphrey & Luke Lindsay & Chris Starmer, 2017. "Consumption experience, choice experience and the endowment effect," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(2), pages 109-120, December.
  • Handle: RePEc:spr:jesaex:v:3:y:2017:i:2:d:10.1007_s40881-017-0044-z
    DOI: 10.1007/s40881-017-0044-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40881-017-0044-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s40881-017-0044-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Starmer, Chris & Sugden, Robert, 1993. "Testing for Juxtaposition and Event-Splitting Effects," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 235-254, June.
    2. 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.
    3. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    4. 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.
    5. Martin Weber & Franz Eisenführ & Detlof von Winterfeldt, 1988. "The Effects of Splitting Attributes on Weights in Multiattribute Utility Measurement," Management Science, INFORMS, vol. 34(4), pages 431-445, April.
    6. Charles R. Plott & Kathryn Zeiler, 2005. "The Willingness to Pay–Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations," American Economic Review, American Economic Association, vol. 95(3), pages 530-545, June.
    7. Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April.
    8. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 41-71.
    9. John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, March.
    10. Graham Loomes & Shepley Orr & Robert Sugden, 2009. "Taste uncertainty and status quo effects in consumer choice," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 113-135, October.
    11. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    12. Humphrey, Steven J, 1995. "Regret Aversion or Event-Splitting Effects? More Evidence under Risk and Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 11(3), pages 263-274, December.
    13. 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.
    14. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    15. Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the "Endowment Effect"," Post-Print hal-00633557, HAL.
    16. Graham Loomes & Chris Starmer & Robert Sugden, 2003. "Do Anomalies Disappear in Repeated Markets?," Economic Journal, Royal Economic Society, vol. 113(486), pages 153-166, March.
    17. Strahilevitz, Michal A & Loewenstein, George, 1998. "The Effect of Ownership History on the Valuation of Objects," Journal of Consumer Research, Oxford University Press, vol. 25(3), pages 276-289, December.
    18. Andrea Isoni & Graham Loomes & Robert Sugden, 2011. "The Willingness to Pay—Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Comment," American Economic Review, American Economic Association, vol. 101(2), pages 991-1011, April.
    19. Bateman, Ian J, et al, 1997. "Does Part-Whole Bias Exist? An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 107(441), pages 322-332, March.
    20. Sugden, Robert, 2003. "Reference-dependent subjective expected utility," Journal of Economic Theory, Elsevier, vol. 111(2), pages 172-191, August.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. John List, 2020. "Experimental tests of the endowment effect and the Coase theorem," Natural Field Experiments 00687, The Field Experiments Website.
    2. Lindsay, Luke, 2019. "Adaptive loss aversion and market experience," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 43-61.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lindsay, Luke, 2019. "Adaptive loss aversion and market experience," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 43-61.
    2. Holden, Stein T. & Bezu, Sosina, 2019. "Exchange asymmetries in productive assets: Tools, fertilizer or cash?," World Development, Elsevier, vol. 115(C), pages 269-278.
    3. Edward J. Lopez & W. Robert Nelson, 2005. "The Endowment Effect in a Public Good Experiment," Experimental 0512001, University Library of Munich, Germany.
    4. Kingsley, David C. & Brown, Thomas C., 2013. "Value learning and the willingness to accept–willingness to pay disparity," Economics Letters, Elsevier, vol. 120(3), pages 473-476.
    5. Andrea Isoni, 2011. "The willingness-to-accept/willingness-to-pay disparity in repeated markets: loss aversion or ‘bad-deal’ aversion?," Theory and Decision, Springer, vol. 71(3), pages 409-430, September.
    6. Svirsky, Daniel, 2014. "Money is no object: Testing the endowment effect in exchange goods," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 227-234.
    7. Smith, Alec, 2019. "Lagged beliefs and reference-dependent utility," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 331-340.
    8. Lunn, Pete & Lunn, Mary, 2014. "A Computational Theory of Willingness to Exchange," Papers WP477, Economic and Social Research Institute (ESRI).
    9. Gächter, Simon & Johnson, Eric J. & Herrmann, Andreas, 2007. "Individual-Level Loss Aversion in Riskless and Risky Choices," IZA Discussion Papers 2961, Institute of Labor Economics (IZA).
    10. John List, 2020. "Experimental tests of the endowment effect and the Coase theorem," Natural Field Experiments 00687, The Field Experiments Website.
    11. Jae-Do Song & Young-Hwan Ahn, 2019. "Cognitive Bias in Emissions Trading," Sustainability, MDPI, vol. 11(5), pages 1-13, March.
    12. Daniel Villanova, 2019. "The extended self, product valuation, and the endowment effect," AMS Review, Springer;Academy of Marketing Science, vol. 9(3), pages 357-371, December.
    13. Lunn,Pete & Lunn, Mary, 2014. "What Can I Get For It? The Relationship Between the Choice Equivalent, Willingness to Accept and Willingness to Pay," Papers WP479, Economic and Social Research Institute (ESRI).
    14. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    15. Dertwinkel-Kalt, Markus & Köhler, Katrin, 2016. "Exchange asymmetries for bads? Experimental evidence," European Economic Review, Elsevier, vol. 82(C), pages 231-241.
    16. Brown, Thomas C. & Morrison, Mark D. & Benfield, Jacob A. & Rainbolt, Gretchen Nurse & Bell, Paul A., 2015. "Exchange asymmetry in experimental settings," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 104-116.
    17. Drouvelis, Michalis & Sonnemans, Joep, 2017. "The endowment effect in games," European Economic Review, Elsevier, vol. 94(C), pages 240-262.
    18. S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    19. Ulrich Schmidt & Stefan Traub, 2009. "An Experimental Investigation of the Disparity Between WTA and WTP for Lotteries," Theory and Decision, Springer, vol. 66(3), pages 229-262, March.
    20. Omar Al-Ubaydli & John List, 2016. "Field Experiments in Markets," Artefactual Field Experiments j0002, The Field Experiments Website.

    More about this item

    Keywords

    Endowment effect; Experience; Splitting effects;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    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:spr:jesaex:v:3:y:2017:i:2:d:10.1007_s40881-017-0044-z. 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: . General contact details of provider: http://www.springer.com .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.