Empirical Evidence of Anchoring and Loss Aversion from Art Auctions

Journal of Cultural Economics (2022)

29 Pages Posted: 22 Aug 2022

See all articles by Kathryn Graddy

Kathryn Graddy

Brandeis University - Department of Economics

Lara Loewenstein

Federal Reserve Bank of Cleveland

Jianping Mei

Cheung Kong Graduate School of Business

Michael Moses

Art Market Consultancy

Rachel A.J. Pownall

Tilburg University - Department of Finance; Maastricht University - Department of Finance

Date Written: January 30, 2022

Abstract

We provide evidence for the behavioral biases of anchoring and loss aversion in paintings sold at auction. We find that anchoring is more important for items that are resold quickly, and that the effect of loss aversion increases with the time that a painting is held. This evidence contributes significantly to the empirical evidence of the endowment effect: of increasing loss aversion with the length of holding. However, we do not find evidence that investors can take advantage of these behavioral biases.

Keywords: Anchoring, Loss Aversion

JEL Classification: G02, G12, Z11

Suggested Citation

Graddy, Kathryn and Loewenstein, Lara and Mei, Jianping and Moses, Michael and Pownall, Rachel Ann Jane, Empirical Evidence of Anchoring and Loss Aversion from Art Auctions (January 30, 2022). Journal of Cultural Economics (2022), Available at SSRN: https://ssrn.com/abstract=4159039

Kathryn Graddy

Brandeis University - Department of Economics ( email )

415 South Street MS 021
Waltham, MA 02453-2728
United States
781-736-8616 (Phone)
781-736-2269 (Fax)

HOME PAGE: http://people.brandeis.edu/~kgraddy/

Lara Loewenstein

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Jianping Mei (Contact Author)

Cheung Kong Graduate School of Business ( email )

1017, Oriental Plaza 1
No.1 Dong Chang'an Street
Beijing
China
010-81588858 (Phone)
100738 (Fax)

Michael Moses

Art Market Consultancy ( email )

20 WEST 64TH STREET
APT 26K
NEW YORK, NY 10023
United States

HOME PAGE: http://www.stern.nyu.edu/om/faculty/moses/

Rachel Ann Jane Pownall

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

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