Endowment as a blessing

Sivan Frenkel, Yuval Heller and Roee Teper (rteper@gmail.com)

MPRA Paper from University Library of Munich, Germany

Abstract: Experimental evidence and field data suggest that agents hold two seemingly unrelated biases: failure to account for the fact that the behavior of others reflects their private information (“winner's curse”), and a tendency to value a good more once it is owned (“endowment effect”). In this paper we propose that these two phenomena are closely related: the biases fully compensate for each other in various economic interactions, and induce an “as-if rational” behavior. We pay specific attention to barter trade, of the kind that was common in prehistoric societies, and suggest that the endowment effect and the winner's curse could have jointly survived natural selection together.

Keywords: Bounded Rationality; Endowment Effect; Winner's Curse; Cursed Equilibrium; Evolution (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
Date: 2012-04-30, Revised 2012-04-30
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/39430/1/MPRA_paper_39430.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/49283/1/MPRA_paper_49283.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/53388/8/MPRA_paper_53388.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/57565/1/MPRA_paper_57565.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/61894/1/MPRA_paper_61894.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/74137/1/MPRA_paper_74137.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/79570/1/MPRA_paper_79570.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/79730/1/MPRA_paper_79730.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39430

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).