Working Paper: NBER ID: w17761
Authors: Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer
Abstract: We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap.
Keywords: endowment effect; salience; consumer choice
JEL Codes: D03; D81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| endowment effect (D11) | overvaluation of endowed good (D46) |
| context of ownership (P26) | endowment effect (D11) |
| positive attributes of endowed good (D64) | endowment effect (D11) |
| new good's disadvantages (L15) | endowment effect (D11) |
| reverse endowment effect (D11) | eagerness to trade away bad endowment (D51) |
| identical goods (H41) | no endowment effect (G40) |
| reference prices (P22) | WTA and WTP gap (J31) |