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On the effect of anchoring on valuations when the anchor is transparently uninformative

Author

Listed:
  • Konstantinos Ioannidis

    (CREED, University of Amsterdam and Tinbergen Institute)

  • Theo Offerman

    (CREED, University of Amsterdam and Tinbergen Institute)

  • Randolph Sloof

    (University of Amsterdam and Tinbergen Institute)

Abstract

We test whether anchoring affects people’s elicited valuations for a bottle of wine in individual decision-making and in markets. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects’ Willingness-To-Accept for the bottle before and after the market. Subjects participate in a double auction market either in a small or a large trading group. The variance in subjects’ Willingness-To-Accept shrinks within trading groups. Our evidence supports the idea that markets have the potential to diminish anchoring effects. However, the market is not needed: our anchoring manipulation failed in a large sample. In a concise meta-analysis, we identify the circumstances under which anchoring effects of preferences can be expected.

Suggested Citation

  • Konstantinos Ioannidis & Theo Offerman & Randolph Sloof, 2020. "On the effect of anchoring on valuations when the anchor is transparently uninformative," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 6(1), pages 77-94, June.
    • Handle: RePEc:spr:jesaex:v:6:y:2020:i:1:d:10.1007_s40881-020-00094-1
    DOI: 10.1007/s40881-020-00094-1
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    Cited by:

    1. Benjamin Enke & Uri Gneezy & Brian Hall & David Martin & Vadim Nelidov & Theo Offerman & Jeroen van de Ven, 2020. "Cognitive Biases: Mistakes or Missing Stakes?," CESifo Working Paper Series 8168, CESifo.
    2. Bahník, Štěpán & Yoon, Sangsuk, 2023. "Anchoring effect in business," OSF Preprints 98qdv, Center for Open Science.
    3. Magdalena Brzozowicz & Michał Krawczyk, 2020. "Honey, Mugs and Caricatures: anchors on prices of consumer goods only hold hypothetically," Working Papers 2020-40, Faculty of Economic Sciences, University of Warsaw.

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    More about this item

    Keywords

    Anchoring; Replication; Market; Experiment; Meta-analysis;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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