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Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience

  • John A. List

A vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience. One potential shortcoming of this literature is that market experience is endogenous. This study presents a framed field experiment that exogenously induces market experience. Empirical findings support the premise that market experience, alone, can eliminate an important market anomaly.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16908.

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Date of creation: Mar 2011
Date of revision:
Publication status: published as John A. List, 2011. "Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience," American Economic Review, American Economic Association, vol. 101(3), pages 313-17, May.
Handle: RePEc:nbr:nberwo:16908
Note: EEE PE
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  1. John A. List & Daniel Millimet, 2004. "The Market: Catalyst for Rationality and Filter of Irrationality," Levine's Bibliography 122247000000000023, UCLA Department of Economics.
  2. Dirk Engelmann & Guillaume Hollard, 2010. "Reconsidering the Effect of Market Experience on the “Endowment Effect”," Econometrica, Econometric Society, vol. 78(6), pages 2005-2019, November.
  3. Robin Greenwood & Stefan Nagel, 2008. "Inexperienced Investors and Bubbles," NBER Working Papers 14111, National Bureau of Economic Research, Inc.
  4. Sousa, Yannick Ferreira De & Munro, Alistair, 2012. "Truck, barter and exchange versus the endowment effect: Virtual field experiments in an online game environment," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 482-493.
  5. Imran Rasul & John List, 2010. "Field experiments in labor economics," Artefactual Field Experiments 00092, The Field Experiments Website.
  6. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  7. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
  8. Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  9. John List, 2004. "Substitutability, experience, and the value disparity: Evidence from the marketplace," Framed Field Experiments 00175, The Field Experiments Website.
  10. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 41-71.
  11. repec:feb:framed:0070 is not listed on IDEAS
  12. Amit Seru & Tyler Shumway & Noah Stoffman, 2010. "Learning by Trading," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 705-739, February.
  13. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
  14. Hyuk Choe & Yunsung Eom, 2009. "The disposition effect and investment performance in the futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(6), pages 496-522, 06.
  15. Ian Bateman & Alistair Munro & Bruce Rhodes & Chris Starmer & Robert Sugden, 1997. "A Test of the Theory of Reference-Dependent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 479-505.
  16. Lei Feng & Mark Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Springer, vol. 9(3), pages 305-351, 09.
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