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American Economic Review: Vol. 102 No. 3 (May 2012)

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Salience in Experimental Tests of the Endowment Effect

Article Citation

Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. 2012. "Salience in Experimental Tests of the Endowment Effect." American Economic Review, 102(3): 47-52.

DOI: 10.1257/aer.102.3.47

Abstract

We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap.

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Authors

Bordalo, Pedro (Royal Holloway, U London)
Gennaioli, Nicola (CREI, U Pompeu Fabra and Barcelona Graduate School of Economics)
Shleifer, Andrei (Harvard U)

JEL Classifications

D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D11: Consumer Economics: Theory
D81: Criteria for Decision-Making under Risk and Uncertainty


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