Buying and Selling Risk - An Experiment Investigating Evaluation Asymmetries
Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive compatibility. Furthermore, we focus on risky goods - binary monetary lotteries - for which asymmetries in evaluations are more robust with respect to experimental procedures. For both elicitation mechanisms, the usual asymmetry in evaluation by sellers and buyers is observed. An econometric estimation sheds new light on its causes: potential buyers are over-pessimistic and systematically underweight the probability of a good outcome.
|Date of creation:||05 Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Carl-Zeiss-Strasse 3, 07743 JENA|
Phone: +049 3641/ 9 43000
Fax: +049 3641/ 9 43000
Web page: http://www.jenecon.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Huck, Steffen & Kirchsteiger, Georg & Oechssler, Jörg, 1997.
"Learning to like what you have: Explaining the endowment effect,"
SFB 373 Discussion Papers
1997,38, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2005. "Learning to like what you have - explaining the endowment effect," Economic Journal, Royal Economic Society, vol. 115(505), pages 689-702, 07.
- Steffen Huck & Georg Kirchsteiger & Joerg Oechssler, 1997. "Learning to Like What You Have - Explaining the Endowment Effect," Game Theory and Information 9702001, EconWPA, revised 15 May 1997.
- Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2003. "Learning to Like What You Have - Explaining the Endowment Effect," Bonn Econ Discussion Papers bgse5_2003, University of Bonn, Germany.
- Koszegi, Botond & Rabin, Matthew, 2004.
"A Model of Reference-Dependent Preferences,"
Department of Economics, Working Paper Series
qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- 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.
- Gary E. Bolton & Jordi Brandts & Axel Ockenfels, 2000.
"Fair Procedures. Evidence from Games Involving Lotteries,"
UFAE and IAE Working Papers
483.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Gary E Bolton & Jordi Brandts & Axel Ockenfels, 2005. "Fair Procedures: Evidence from Games Involving Lotteries," Economic Journal, Royal Economic Society, vol. 115(506), pages 1054-1076, October.
- Safra, Zvi & Segal, Uzi & Spivak, Avia, 1990. "The Becker-DeGroot-Marschak Mechanism and Nonexpected Utility: A Testable Approach," Journal of Risk and Uncertainty, Springer, vol. 3(2), pages 177-90, June.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-84, December.
- Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
- Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
- John List, 2003.
"Does market experience eliminate market anomalies?,"
Natural Field Experiments
00297, The Field Experiments Website.
- John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 41-71.
- repec:hal:journl:hal-00609214 is not listed on IDEAS
- Karni, Edi & Safra, Zvi, 1987. ""Preference Reversal' and the Observability of Preferences by Experimental Methods," Econometrica, Econometric Society, vol. 55(3), pages 675-85, May.
- Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
- Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
- Fehl, Ulrich & Guth, Werner, 1987. "Internal and external stability of bidder cartels in auctions and public tenders: A comparison of pricing rules," International Journal of Industrial Organization, Elsevier, vol. 5(3), pages 303-313.
- Mohammed Abdellaoui & Aurelien Baillon & Laetitia Placido & Peter P. Wakker, 2011. "The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation," American Economic Review, American Economic Association, vol. 101(2), pages 695-723, April.
- George Wu & Richard Gonzalez, 1996. "Curvature of the Probability Weighting Function," Management Science, INFORMS, vol. 42(12), pages 1676-1690, December.
When requesting a correction, please mention this item's handle: RePEc:jrp:jrpwrp:2013-047. 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: (Markus Pasche)
If references are entirely missing, you can add them using this form.