A Process Account of the Endowment Effect: Voluntary Debiasing Through Agents and Markets

Arlen, Jennifer; Tontrup, Stephan

doi:10.2139/ssrn.2263447

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Cited by 3 publications

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“…6 Alternatively, scholars such as Arlen and Tontrup (2013) argue in favor of a process account of the endowment effect. The endowment effect is driven by the fear of regretting one's transaction.…”

Section: Related Literaturementioning

confidence: 99%

Testing the Endowment Effect for Default Rules

Marcin

Nicklisch

2014

SSRN Journal

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This paper explores potential endowment effects of contractual default rules. For this purpose, we analyze the Hadley liability default clause in a model of bilateral bargaining of lotteries against safe options. The liability default clause determines the right for the safe payoff option. We test the model in series of laboratory experiments. The results reveal a substantial willingness-to-accept to willingnessto-pay gap for the right to change lotteries against safe options. Even if we apply the incentive compatible Becker-DeGroot-Marschak value elicitation mechanism, there is a significant gap indicating a robust endowment effect caused by default rules. Differences of expected values of the lotteries and the safe options consistently decrease the gaps. Implications for applications of default rules in the law are discussed.

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Section: Related Literaturementioning

confidence: 99%