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When the shoe is on the other foot: experimental evidence on evaluation disparities

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  • Lucy F. Ackert
  • Bryan K. Church
  • Gerald P. Dwyer

Abstract

Research provides evidence that the method chosen to elicit value has an important effect on a person’s valuation. We hypothesize that role has a crucial effect on decision makers’ elicited values: Buyers prefer to pay less and sellers prefer to collect more. We conduct experimental sessions and replicate the disparity between willingness to pay and willingness to accept. We conduct additional sessions in which role is stripped away: Endowed decision makers provide values that are used to determine a price at which anonymous others transact. Importantly, decision makers’ earnings in the experiment are not affected by the elicited values, but the endowments influence decision makers’ valuations. Our findings suggest that decision makers consider their relative standing, in comparison to anonymous others, in providing valuations. The disparity between willingness to pay and willingness to accept disappears when decision makers’ endowments ensure that they are at least as well off as other participants.

Suggested Citation

  • Lucy F. Ackert & Bryan K. Church & Gerald P. Dwyer, 2005. "When the shoe is on the other foot: experimental evidence on evaluation disparities," FRB Atlanta Working Paper 2005-17, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2005-17
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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