Working Paper: CEPR ID: DP10048
Authors: Kathryn Graddy; Lara Loewenstein; Jianping Mei; Mike Moses; Rachel A. J. Pownall
Abstract: We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.
Keywords: anchoring; art auctions; endowment effect; loss aversion
JEL Codes: D03; D44; Z11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| anchoring (Y60) | stronger anchoring effects (G41) |
| quicker resale (R31) | stronger anchoring effects (G41) |
| duration held (C41) | increased valuation due to loss aversion (G41) |
| 10% unrealized loss (G19) | 62% increase in sale price (G19) |
| loss aversion (G41) | increased valuation (D46) |
| 10% expected gain (G17) | 0.9% decrease in price (E31) |