Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77552
Authors: 
Lindsay, Luke
Year of Publication: 
2011
Series/Report no.: 
Working Paper Series, Department of Economics, University of Zurich 5
Abstract: 
Many studies have found a gap between willingness-to-pay and willingness-to-accept that is inconsistent with standard theory. There is also evidence that the gap is eroded by experience gained in the laboratory and naturally occurring markets. This paper argues that the gap and the effects of experience are explained by a caution heuristic. This conjecture is tested in a repeated market experiment with symmetric and asymmetric information. The results support the conjecture: people do seem to use heuristics rather than reacting optimally and their behavior adjusts slowly when the environment changes.
Subjects: 
WTA/WTP disparity
endowment effect
market experience
bounded rationality
asymmetric information
JEL: 
D4
D81
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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