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Effect of price quoting on financial asset prices: an experimental analysis

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  • Tal Shavit
  • Shosh Shahrabani
  • Uri Benzion

Abstract

Stock options are usually sold in bundles of 100 units, and their price can be quoted either per unit or per bundle. In this article, the effect of different methods of quoting financial asset prices on the subjective value of a contract was examined experimentally. In particular, we examined differences in participants' Willingness-To-Pay and Willingness-To-Accept for financial assets depending upon whether prices are quoted per unit or per bundle. We found that participants bid (ask) a higher price when prices are quoted per unit than when they are quoted per bundle. The results indicated that different quoting methods affect the bidding price for risky assets. These results can have important implications for trading on financial markets.

Suggested Citation

  • Tal Shavit & Shosh Shahrabani & Uri Benzion, 2010. "Effect of price quoting on financial asset prices: an experimental analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1219-1222.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:12:p:1219-1222
    DOI: 10.1080/17446540902845487
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