Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences

Annette Cerulli-Harms, Lorenz Goette and Charles Sprenger

American Economic Journal: Microeconomics, 2019, vol. 11, issue 1, 185-207

Abstract: We test expectations-based reference dependence in market experiments with probabilistic forced exchange. Koszegi and Rabin (2006) predict that when the probability of forced exchange increases, individuals cannot expect to stick with the status quo, and should grow more willing to exchange. This mechanism may eliminate and even reverse the "endowment effect" (Knetsch and Sinden 1984; Kahneman, Knetsch, and Thaler 1990). In a series of experiments with overall 930 subjects, we show some tentative support for the notion that attitudes toward exchange are influenced by the probability of forced exchange. However, the results are sensitive to small changes in experimental design.

JEL-codes: C92 D12 D84 D91 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mic.20170271
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