Is the Endowment Effect a Reference Effect?

47 Pages Posted: 24 Jan 2011 Last revised: 5 Mar 2023

See all articles by Ori Heffetz

Ori Heffetz

Cornell University - S.C. Johnson Graduate School of Management; The Hebrew University of Jerusalem - Department of Economics and Center for Rationality; National Bureau of Economic Research (NBER)

John A. List

University of Chicago - Department of Economics

Date Written: January 2011

Abstract

This paper is aimed to assess, with two lab experiments, to what extent Kőszegi and Rabin's (2006) model of expectations-based reference-dependent preferences can explain Knetsch's (1989) endowment effect. Departing from past work, we design an experiment that treats the two goods (a mug and a pen) symmetrically in all but in the probabilities with which they are expected to be owned. Thus, our "endowmentless" endowment effect experiment shuts down all alternative mechanisms while leaving expectations the only difference between treatments. We find no evidence that expectations alone can reproduce any of the original effect.

Suggested Citation

Heffetz, Ori and List, John A., Is the Endowment Effect a Reference Effect? (January 2011). NBER Working Paper No. w16715, Available at SSRN: https://ssrn.com/abstract=1744669

Ori Heffetz (Contact Author)

Cornell University - S.C. Johnson Graduate School of Management ( email )

324 Sage Hall
Ithaca, NY 14853
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The Hebrew University of Jerusalem - Department of Economics and Center for Rationality

Mount Scopus
Jerusalem, Jerusalem 91905
Israel

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/~heffetz

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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