The Effect of Initial Endowments in Experimental Auctions
10 Pages Posted: 22 Apr 2020
Date Written: May 2006
We report the results of an experiment designed to test whether initial endowments affect value estimates elicited from experimental auctions. Comparing bids for one unit of a good, two units of a good, and a second unit of a good when endowed with the first unit, we find that willingness to pay for the second unit of a good is, on average, as much as 75% higher when endowed with the first unit. We go on to advance two theories that could potentially reconcile our results with neoclassical consumer theory.
Keywords: endowment effect, experimental auctions, reciprocity, top-dog effect
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