On the effect of anchoring on valuations when the anchor is transparently uninformative

Tinbergen Institute Discussion Paper 2019-074/I

37 Pages Posted: 2 Dec 2019 Last revised: 30 Apr 2020

See all articles by Konstantinos Ioannidis

Konstantinos Ioannidis

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; University of Amsterdam - Center for Research in Experimental Economics and Political Decision-Making (CREED)

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB); Tinbergen Institute

Date Written: April 27, 2020

Abstract

We test whether anchoring affects people's elicited valuations for a bottle of wine in individual decision making and in markets. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects' Willingness-To-Accept for the bottle before and after the market. Subjects participate in a double auction market either in a small or a large trading group. The variance in subjects' Willingness-To-Accept shrinks within trading groups. Our evidence supports the idea that markets have the potential to diminish anchoring effects. However, the market is not needed: our anchoring manipulation failed in a large sample.

Keywords: anchoring, replication, market, experiment

JEL Classification: D01, D91, C91

Suggested Citation

Ioannidis, Konstantinos and Offerman, Theo and Sloof, Randolph, On the effect of anchoring on valuations when the anchor is transparently uninformative (April 27, 2020). Tinbergen Institute Discussion Paper 2019-074/I. Available at SSRN: https://ssrn.com/abstract=3483517 or http://dx.doi.org/10.2139/ssrn.3483517

Konstantinos Ioannidis (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

University of Amsterdam - Center for Research in Experimental Economics and Political Decision-Making (CREED) ( email )

Faculty of Economics and Econometrics
Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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