Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94556
Authors: 
Marcin, Isabel
Nicklisch, Andreas
Year of Publication: 
2014
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2014/1
Abstract: 
This paper explores potential endowment effects of contractual default rules. For this purpose, we analyze the Hadley liability default clause in a model of bilateral bargaining of lotteries against safe options. The liability default clause determines the right for the safe payoff option. We test the model in series of laboratory experiments. The results reveal a substantial willingness-to-accept to willingness-to-pay gap for the right to change lotteries against safe options. Even if we apply the incentive compatible Becker-DeGroot-Marschak value elicitation mechanism, there is a significant gap indicating a robust endowment effect caused by default rules. Differences of expected values of the lotteries and the safe options consistently decrease the gaps. Implications for applications of default rules in the law are discussed.
Subjects: 
Default rules
Endowment effect
Lotteries
JEL: 
K00
C91
K12
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.