Is the endowment effect an expectations effect?

Ori Heffetz, John A. List

Research output: Contribution to journalArticleResearchpeer-review

34 Citations (Scopus)

Abstract

A hallmark result within behavioral economics is that individuals' choices are affected by current endowments. A recent theory due to Koszegi and Rabin (Quarterly Journal of Economics, 121, 1133-1165) explains such endowment effect with a model of expectations-based reference-dependent preferences. Departing from past work, we conduct complementary experiments to disentangle expectations-verified probabilistic beliefs held by subjects-from other features of endowment-such as "assignment" to a good-hence allowing us to compare the effect of expectations with that of other variations. While mere assignment can affect choices, we do not find a large role in the effect for Koszegi-Rabin expectations.

Original languageEnglish
Pages (from-to)1396-1422
Number of pages27
JournalJournal of the European Economic Association
Volume12
Issue number5
DOIs
Publication statusPublished - 1 Oct 2014
Externally publishedYes

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