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  • 1
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    Nottingham: The University of Nottingham, Centre for Decision Research and Experimental Economics (CeDEx)
    Publication Date: 2018-07-02
    Description: This paper reports an experiment investigating how different kinds of experience influence the endowment effect. Previous studies have investigated how the endowment effect is influenced by experience gained through repetition of decision problems and trading in natural and experimental markets. In this study we explore how it is influenced by experience of consuming elements of a potential endowment and by experience of choosing prior to acquiring an endowment. We find evidence of an endowment effect and that measured loss aversion predicts the reluctance to trade. We find no effect of consumption experience. Choice experience increases trading. Finally, we find evidence of a new species of 'splitting effect', whereby acquiring an endowment in two instalments significantly reduces trading.
    Keywords: C91 ; D12 ; ddc:330 ; endowment effect ; experience ; splitting effects
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 2
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    Zurich: University of Zurich, Department of Economics
    Publication Date: 2018-06-28
    Description: This paper reports results from a series of laboratory experiments designed to evaluate the impact of exposure risk on market performance. Exposure risk arises when there are complementarities between trades, e.g. when the purchase of a new house requires selling the old one. The continuous double auction (CDA), which has proven to be remarkably effective in a wide variety of settings, performs poorly in a treatment with high exposure risk: overall market efficiency is only 20% and there are many instances of no trade. In a parallel treatment with lower exposure risk, efficiency under the CDA is higher (55%) but is dominated, for instance, by a top-trading-cycles procedure that uses no money. The CDA's poor performance does not depend on whether house values are private information or common knowledge, indicating that exposure risk is due to strategic uncertainty not objective uncertainty about others' preferences. We introduce a simple package market and show that it effectively resolves exposure risk: efficiency levels are 82% and 89% respectively for the low and high exposure treatments. The proposed package market is a simple extension of the CDA and could potentially be applied in a variety contexts.
    Keywords: C92 ; ddc:330 ; exposure risk ; package markets ; market design ; laboratory experiments ; Risiko ; Marktstruktur ; Marktmechanismus ; Test
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 3
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    Zurich: University of Zurich, Department of Economics
    Publication Date: 2018-06-28
    Description: We employ laboratory methods to study stability of competitive equilibrium in Scarf's economy (International Economic Review, 1960). Tatonnement theory predicts that prices are globally unstable for this economy, i.e. unless prices start at the competitive equilibrium they oscillate without converging. Anderson et al. (Journal of Economic Theory, 2004) report that in laboratory double auction markets, prices in the Scarf economy do indeed oscillate with no clear sign of convergence. We replicate their experiments and confirm that tatonnement theory predicts the direction of price changes remarkably well. Prices are globally unstable with adverse effects for the economy's efficiency and the equitable distribution of the gains from trade. We also introduce a novel market mechanism where participants submit demand schedules and prices are computed using Smale's global Newtonian dynamic (American Economic Review, 1976). We show that for the Scarf economy, submitting a competitive schedule, i.e. a set of quantities that maximize utility taking prices as given, is a weakly dominant strategy. The resulting outcome corresponds to the unique competitive equilibrium of the Scarf economy. In experiments that employ the schedule market, prices do not oscillate but instead converge quickly to the competitive equilibrium. Besides stabilizing prices, the schedule market is more efficient and results in highly egalitarian outcomes.
    Keywords: C92 ; D50 ; ddc:330 ; scarf economy ; tatonnement ; global Newtonian dynamic ; instability ; general equilibrium ; market design ; Tauschwirtschaft ; Marktmechanismus ; Allgemeines Gleichgewicht ; Gleichgewichtsstabilität ; Theorie
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 4
    Publication Date: 2018-06-28
    Description: Many studies have found a gap between willingness-to-pay and willingness-to-accept that is inconsistent with standard theory. There is also evidence that the gap is eroded by experience gained in the laboratory and naturally occurring markets. This paper argues that the gap and the effects of experience are explained by a caution heuristic. This conjecture is tested in a repeated market experiment with symmetric and asymmetric information. The results support the conjecture: people do seem to use heuristics rather than reacting optimally and their behavior adjusts slowly when the environment changes.
    Keywords: D4 ; D81 ; D82 ; ddc:330 ; WTA/WTP disparity ; endowment effect ; market experience ; bounded rationality ; asymmetric information ; Willingness to pay ; Beschränkte Rationalität ; Asymmetrische Information ; Auktionstheorie ; Test
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 5
    Publication Date: 2018-11-15
    Description: This note briefly summarizes the consequences of adding correlated individual differences to the best baseline model in the Games competition, I-SAW. I find evidence that the traits of an individual are correlated, but refining I-SAW to capture these correlations does not significantly improve the model's accuracy when predicting average behavior.
    Keywords: ddc:330 ; individual differences ; choice prediction ; I-SAW ; modeling correlation
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:article
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