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
Date Written: April 27, 2020
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: Suggested Citation