Working Paper: NBER ID: w30836
Authors: Jonathan Chapman; Mark Dean; Pietro Ortoleva; Erik Snowberg; Colin Camerer
Abstract: We use four incentivized representative surveys to study the endowment effect for lotteries in 4,000 U.S. adults. We replicate the standard finding of an endowment effect—the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP), but document three new findings. First, we find little evidence that the endowment effect is related to loss aversion for risky prospects, counter to predictions of popular theories in economics. Second, WTA and WTP not only diverge, but are, at best, weakly correlated. Third, WTA and WTP strongly relate to other aspects of risk preferences. The structure of these behaviors points to different theories of the endowment effect.
Keywords: Endowment Effect; Loss Aversion; Willingness to Accept; Willingness to Pay; Risk Preferences
JEL Codes: C90; D81; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| endowment effect (D11) | loss aversion (G41) |
| WTA (F13) | risk preferences (D81) |
| WTP (F13) | risk preferences (D81) |
| loss aversion (G41) | endowment effect (D11) |