Loss Aversion, Expectations and Anchoring in the BDM Mechanism

Achilleas Vassilopoulos, Andreas Drichoutis and Rodolfo Nayga ()

MPRA Paper from University Library of Munich, Germany

Abstract: We present the results of an economic laboratory experiment that tests behavioral biases that have been associated with the BDM mechanism. By manipulating the highest random competing bid, the maximum possible loss, the distribution of prices and the elicitation format, we attempt to disentangle the effects of reference-dependence, expectations as well as price and loss anchoring on subjects' bids. The results show that bids are affected by expectations and anchoring on the highest price but not by anchoring on the maximum possible loss. In addition, results are supportive of the no-loss-in-buying hypothesis of Novemsky and Kahneman (2005).

Keywords: Becker-DeGroot-Marschak (BDM) mechanism; expectations; anchoring; valuation; experiment (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
Date: 2018-03-22
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: View citations in EconPapers (6)

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Related works:
Working Paper: Loss Aversion, Expectations and Anchoring in the BDM Mechanism (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:85635

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