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Empirical Evidence of Anchoring and Loss Aversion from Art Auctions

Author

Listed:
  • Kathryn Graddy

    (International Business School, Brandeis University)

  • Lara Loewenstein

    (International Business School, Brandeis University)

  • Jianping Mei

    (Cheung Kong Graduate School of Buisness)

  • Mike Moses

    (Beautiful Asset Advisors, LLC)

  • Rachel Pownall

    (Maastricht University and Tilberg University)

Abstract

We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.

Suggested Citation

  • Kathryn Graddy & Lara Loewenstein & Jianping Mei & Mike Moses & Rachel Pownall, 2014. "Empirical Evidence of Anchoring and Loss Aversion from Art Auctions," Working Papers 73, Brandeis University, Department of Economics and International Business School, revised Apr 2015.
    • Handle: RePEc:brd:wpaper:73
    as

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    File URL: http://www.brandeis.edu/economics/RePEc/brd/doc/Brandeis_WP73R.pdf
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    References listed on IDEAS

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    Cited by:

    1. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "In Art We Trust," Discussion Paper 2021-016, Tilburg University, Center for Economic Research.
    2. Ma, Marshall Xiaoyin & Noussair, Charles N. & Renneboog, Luc, 2022. "Colors, Emotions, and the Auction Value of Paintings," European Economic Review, Elsevier, vol. 142(C).
    3. Ma, X., 2019. "Essays on alternative investments," Other publications TiSEM 7f4d5b36-96cb-4eac-ae91-f, Tilburg University, School of Economics and Management.
    4. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "Pricing Art and the Art of Pricing : On Returns and Risk in Art Auction Markets," Discussion Paper 2021-018, Tilburg University, Center for Economic Research.
    5. Emmanuel Joel Aikins Abakah & Aviral Kumar Tiwari & Emmanuel Kwesi Arthur & Luis Alberiko Gil-Alana, 2023. "The influence of economic policy uncertainty shocks on art market," Applied Economics, Taylor & Francis Journals, vol. 55(29), pages 3404-3421, June.

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    More about this item

    Keywords

    anchoring; loss aversion; endowment effect; art auctions;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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