WTP vs. WTA: Christmas Presents and the Endowment Effect

13 Pages Posted: 1 Dec 2008

See all articles by Christoph M. Schmidt

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen); University of Bochum - Faculty of Economics; IZA Institute of Labor Economics

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Abstract

Using data on the valuation of Christmas gifts received by students in different fields at a German university, we investigate whether the endowment effect differs between students of economics and other respondents and whether it varies with the market price of the object under consideration. Our estimation results suggest that economics students have both, a significant lower WTP and WTA, indicating that existing studies on the efficiency loss of holiday gifts and experimental studies on the endowment effect that rely on data from economics students may be biased. The result further indicates that the endowment effect is independent of the market price of the object.

Keywords: loss aversion, endowment effect, Christmas presents, deadweight loss

JEL Classification: D01, D49, D61

Suggested Citation

Schmidt, Christoph M. and Bauer, Thomas K., WTP vs. WTA: Christmas Presents and the Endowment Effect. IZA Discussion Paper No. 3855. Available at SSRN: https://ssrn.com/abstract=1309097 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Christoph M. Schmidt (Contact Author)

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