Buying and Selling Risk - An Experiment Investigating Evaluation Asymmetries

Werner Güth (), Matteo Ploner and Ivan Soraperra

No 2013-047, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive compatibility. Furthermore, we focus on risky goods - binary monetary lotteries - for which asymmetries in evaluations are more robust with respect to experimental procedures. For both elicitation mechanisms, the usual asymmetry in evaluation by sellers and buyers is observed. An econometric estimation sheds new light on its causes: potential buyers are over-pessimistic and systematically underweight the probability of a good outcome.

Keywords: WTP-WTA gap; Risk; Elicitation Mechanisms; Probability Weighting (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 (search for similar items in EconPapers)
Date: 2013-11-05
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://oweb.b67.uni-jena.de/Papers/jerp2013/wp_2013_047.pdf (application/pdf)

Related works:
Working Paper: Buying and Selling Risk - An Experiment Investigating Evaluation Asymmetries (2014)
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:jrp:jrpwrp:2013-047

Access Statistics for this paper

More papers in Jena Economics Research Papers from Friedrich-Schiller-University Jena
Bibliographic data for series maintained by Markus Pasche ().