Salience in Experimental Tests of the Endowment Effect

Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer

doi:10.1257/aer.102.3.47

Salience in Experimental Tests of the Endowment Effect

Pedro Bordalo¹; Nicola Gennaioli²; Andrei Shleifer³

¹ Royal Holloway, University of London, Egham Hill, Egham, TW20 0EX, UK. · ² CREI, Universitat Pompeu Fabra, and Barcelona GSE, Ramon Trias Fargas, 25-27, 08005-Barcelona, Spain. · ³ Harvard University, Economics Department, Littauer Center, 1805 Cambridge Street, Cambridge, MA 02138.

American Economic Review 2012

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.

DOI: 10.1257/aer.102.3.47
Volume: 102 (3)
Pages: 47-52
Language: en
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