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Anchoring or Loss Aversion? Empirical Evidence from Art Auctions

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  • Graddy, Kathryn
  • Loewenstein, Lara
  • Mei, Jianping
  • Moses, Mike
  • Pownall, Rachel A J

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

  • Graddy, Kathryn & Loewenstein, Lara & Mei, Jianping & Moses, Mike & Pownall, Rachel A J, 2014. "Anchoring or Loss Aversion? Empirical Evidence from Art Auctions," CEPR Discussion Papers 10048, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10048
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Anchoring or Loss Aversion? Empirical Evidence from Art Auctions
      by Alessandro Cerboni in Knowledge Team on 2014-08-07 12:16:26

    Citations

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    Cited by:

    1. Penasse, J.N.G. & Renneboog, L.D.R., 2014. "Bubbles and Trading Frenzies : Evidence from the Art Market," Other publications TiSEM bf0d8984-df7f-4f02-afc7-3, Tilburg University, School of Economics and Management.
    2. Spaenjers, Christophe & Goetzmann, William N. & Mamonova, Elena, 2015. "The economics of aesthetics and record prices for art since 1701," Explorations in Economic History, Elsevier, vol. 57(C), pages 79-94.
    3. Justin S. Skillman & Michael J. Vernarelli, 2016. "Framing effects on bidding behavior in experimental first-price sealed-bid money auctions," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(4), pages 391-400, July.
    4. Peyman Khezr & Shabbir Ahmad, 2018. "Anchoring in the Housing Market: Evidence from Sydney," Discussion Papers Series 596, School of Economics, University of Queensland, Australia.
    5. Federico Etro & Elena Stepanova, 2020. "Art Return Rates from Old Master Paintings to Contemporary Art," LEM Papers Series 2020/30, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

    More about this item

    Keywords

    anchoring; art auctions; endowment effect; loss aversion;

    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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