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Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?

Plott, Charles R. and Zeiler, Kathryn (2007) Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory? American Economic Review, 97 (4). pp. 1449-1466. ISSN 0002-8282. https://resolver.caltech.edu/CaltechAUTHORS:PLOaer07

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Abstract

Systematic asymmetries in exchange behavior have been widely interpreted as support for "endowment effect theory," an application of prospect theory positing that loss aversion and utility function kinks set by entitlements explain observed asymmetries. We experimentally test an alternative explanation, namely, that asymmetries are explained by classical preference theories finding influence through the experimental procedures typically used. Contrary to the predictions of endowment effect theory, we observe no asymmetries when we modify procedures to remove the influence of classical preference theories. When we return to traditional-type procedures, however, the asymmetries reappear. The results support explanations based in classical preference theories and reject endowment effect theory.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1257/aer.97.4.1449DOIUNSPECIFIED
Additional Information:Copyright © American Economic Association 2007. The financial support of the National Science Foundation and the Laboratory of Experimental Economics and Political Science is gratefully acknowledged. We thank numerous Georgetown students for excellent research assistance and several Caltech and Georgetown students who helped conduct the experiments.
Issue or Number:4
Record Number:CaltechAUTHORS:PLOaer07
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:PLOaer07
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:9202
Collection:CaltechAUTHORS
Deposited By: Archive Administrator
Deposited On:20 Nov 2007
Last Modified:02 Oct 2019 23:58

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