IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v120y2015icp104-116.html
   My bibliography  Save this article

Exchange asymmetry in experimental settings

Author

Listed:
  • Brown, Thomas C.
  • Morrison, Mark D.
  • Benfield, Jacob A.
  • Rainbolt, Gretchen Nurse
  • Bell, Paul A.

Abstract

We review past trading experiments and present 11 new experiments designed to show how the trading rate responds to alterations of the experimental procedure. In agreement with earlier studies, results show that if the trade decision is converted to one resembling a choice between goods the exchange asymmetry disappears, but otherwise the asymmetry is remarkably robust. Results also indicate that when trading is public herding can occur, which may have caused some of the more extreme examples of the exchange asymmetry, and that some of the lack of trade may result from preference indifference. Nevertheless, some form of status quo bias, which may consist of a combination of loss aversion, gain attraction, regret avoidance, and dislike of trading, and which may be enhanced by indifference between the goods offered, probably remains as an important influence on the trading rate.

Suggested Citation

  • Brown, Thomas C. & Morrison, Mark D. & Benfield, Jacob A. & Rainbolt, Gretchen Nurse & Bell, Paul A., 2015. "Exchange asymmetry in experimental settings," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 104-116.
    • Handle: RePEc:eee:jeborg:v:120:y:2015:i:c:p:104-116
    DOI: 10.1016/j.jebo.2015.09.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268115002401
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2015.09.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 507-521.
    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. Ori Heffetz & John A. List, 2014. "Is The Endowment Effect An Expectations Effect?," Journal of the European Economic Association, European Economic Association, vol. 12(5), pages 1396-1422, October.
    4. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    5. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-1284, December.
    6. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2012. "Salience in Experimental Tests of the Endowment Effect," American Economic Review, American Economic Association, vol. 102(3), pages 47-52, May.
    7. Knetsch, Jack L. & Wong, Wei-Kang, 2009. "The endowment effect and the reference state: Evidence and manipulations," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 407-413, August.
    8. 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.
    9. Smith, Vernon L., 2010. "Theory and experiment: What are the questions?," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 3-15, January.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Knetsch, Jack L., 1992. "Preferences and nonreversibility of indifference curves," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 131-139, January.
    12. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    13. Harbaugh, William T. & Krause, Kate & Vesterlund, Lise, 2001. "Are adults better behaved than children? Age, experience, and the endowment effect," Economics Letters, Elsevier, vol. 70(2), pages 175-181, February.
    14. Strahilevitz, Michal A & Loewenstein, George, 1998. "The Effect of Ownership History on the Valuation of Objects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 25(3), pages 276-289, December.
    15. Mary F. Evans & Nicholas E. Flores & Kevin J. Boyle, 2003. "Multiple-Bounded Uncertainty Choice Data as Probabilistic Intentions," Land Economics, University of Wisconsin Press, vol. 79(4), pages 549-560.
    16. John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, March.
    17. Ratan Anmol, 2014. "Anticipated Regret or Endowment Effect? A Reconsideration of Exchange Asymmetry in Laboratory Experiments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 277-298, January.
    18. Ready Richard C. & Whitehead John C. & Blomquist Glenn C., 1995. "Contingent Valuation When Respondents Are Ambivalent," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 181-196, September.
    19. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 41-71.
    20. Michael Mandler, 2004. "Status quo maintenance reconsidered: changing or incomplete preferences?," Economic Journal, Royal Economic Society, vol. 114(499), pages 518-535, November.
    21. Brown, Thomas C. & Kingsley, David & Peterson, George L. & Flores, Nicholas E. & Clarke, Andrea & Birjulin, Andrej, 2008. "Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement," Journal of Public Economics, Elsevier, vol. 92(7), pages 1595-1606, July.
    22. Harbaugh, William & Krause, Catherine & Vesterlund, Lise, 2001. "Are Children Better Behaved Than Adults? Age, Experience and the Endowment Effect," Staff General Research Papers Archive 1950, Iowa State University, Department of Economics.
    23. Charles R. Plott & Kathryn Zeiler, 2007. "Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?," American Economic Review, American Economic Association, vol. 97(4), pages 1449-1466, September.
    24. van Dijk, Eric & van Knippenberg, Daan, 1998. "Trading wine: On the endowment effect, loss aversion, and the comparability of consumer goods," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 485-495, August.
    25. Keith M. Marzilli Ericson & Andreas Fuster, 2011. "Expectations as Endowments: Evidence on Reference-Dependent Preferences from Exchange and Valuation Experiments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 1879-1907.
    26. Nicholas C. Barberis, 2013. "Thirty Years of Prospect Theory in Economics: A Review and Assessment," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 173-196, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Holden, Stein T. & Bezu, Sosina, 2019. "Exchange asymmetries in productive assets: Tools, fertilizer or cash?," World Development, Elsevier, vol. 115(C), pages 269-278.
    2. John List, 2020. "Experimental tests of the endowment effect and the Coase theorem," Natural Field Experiments 00687, The Field Experiments Website.
    3. Amiran, Edoh Y. & Hagen, Daniel A., 2018. "What do income tests tell us about the gap between WTA and WTP for public goods?," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 134-146.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    2. Holden, Stein T. & Bezu, Sosina, 2019. "Exchange asymmetries in productive assets: Tools, fertilizer or cash?," World Development, Elsevier, vol. 115(C), pages 269-278.
    3. Santosh Anagol & Vimal Balasubramaniam & Tarun Ramadorai, 2018. "Endowment Effects in the Field: Evidence from India’s IPO Lotteries," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 1971-2004.
    4. Holden, Stein & Bezu, Sosina, 2014. "Tools, Fertilizer or Cash? Exchange Asymmetries in Productive Assets," CLTS Working Papers 13/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 11 Oct 2019.
    5. Christina McGranaghan & Steven G. Otto, 2022. "Choice uncertainty and the endowment effect," Journal of Risk and Uncertainty, Springer, vol. 65(1), pages 83-104, August.
    6. John List, 2020. "Experimental tests of the endowment effect and the Coase theorem," Natural Field Experiments 00687, The Field Experiments Website.
    7. Smith, Alec, 2019. "Lagged beliefs and reference-dependent utility," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 331-340.
    8. Dietz, Simon & Venmans, Frank, 2019. "The endowment effect, discounting and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 97(C), pages 67-91.
    9. Ori Heffetz & John A. List, 2011. "Is the Endowment Effect a Reference Effect?," NBER Working Papers 16715, National Bureau of Economic Research, Inc.
    10. Keith M. Marzilli Ericson & Andreas Fuster, 2014. "The Endowment Effect," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 555-579, August.
    11. 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.
    12. Spantig, Lisa, 2021. "Cash in hand and savings decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1206-1220.
    13. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    14. Lunn,Pete & Lunn, Mary, 2014. "What Can I Get For It? The Relationship Between the Choice Equivalent, Willingness to Accept and Willingness to Pay," Papers WP479, Economic and Social Research Institute (ESRI).
    15. Steffen Andersen & Alec Brandon & Uri Gneezy & John List, 2014. "Toward an Understanding of Reference-Dependent Labor Supply: Theory and Evidence from a Field Experiment," Framed Field Experiments 00392, The Field Experiments Website.
    16. Dertwinkel-Kalt, Markus & Köhler, Katrin, 2016. "Exchange asymmetries for bads? Experimental evidence," European Economic Review, Elsevier, vol. 82(C), pages 231-241.
    17. Bélyácz, Iván & Kovács, Kármen, 2018. "A birtoklási hatás megnyilvánulásának háttere és következményei. A kilátáselmélet alkalmazása fogyasztási döntésekre [Background and consequences of the endowment effect. Applying prospect theory t," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 382-401.
    18. Andrea Isoni & Graham Loomes & Robert Sugden, 2011. "The Willingness to Pay—Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Comment," American Economic Review, American Economic Association, vol. 101(2), pages 991-1011, April.
    19. Yuanji Wen & Stijn Masschelein & Anmol Ratan, 2022. "Loss aversion in asymmetric anti‐coordination games," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1549-1573, April.
    20. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.

    More about this item

    Keywords

    Loss aversion; Endowment effect; Herding; Preference indifference; Incomplete preferences; Regret;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:120:y:2015:i:c:p:104-116. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.