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The Endowment Effect and Repeated Market Trials: Is the Vickrey Auction Demand Revealing?

Published online by Cambridge University Press:  14 March 2025

Jack L. Knetsch ,
Fang-Fang Tang  and
Richard H. Thaler
Jack L. Knetsch*
Affiliation:
Department of Economics, Simon Fraser University, Burnaby, British Columbia, Canada
Fang-Fang Tang*
Affiliation:
Faculty of Business Administration, Chinese University of Hong Kong, Shatin, Hong Kong
Richard H. Thaler*
Affiliation:
Graduate School of Business, University of Chicago, Chicago, IL USA
*
email: knetsch@sfu.ca
email: fftang@baf.msmail.cuhk.edu.hk
email: thaler@gsb.uchicago.edu
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Abstract

The difference between people's valuations of gains and losses has been widely observed in both single trial and repeated trial experiments, as well as in survey responses and in commonplace behavior. However, the results of some Vickrey auction experiments indicate that the disparity may decrease, or even disappear, over repeated trials. This paper reports the results of two further repeated Vickrey auction experiments that test the impact of both a second price and a ninth price auction rule on valuations. Although valuations should be independent of this variation in the exchange price rule, the manipulation had a dramatic impact on subjects’ stated values of a common market good. The results suggest that the endowment effect remains robust over repeated trials, and that contrary to common understanding, the Vickrey auction may elicit differing demands dependent on the context of the valuation.

Keywords

endowment effectlearningVickrey auctions

JEL classification

D44: Auctions C91: Laboratory, Individual Behavior
Type
Research Article
Information
Experimental Economics , Volume 4 , Issue 3 , December 2001 , pp. 257 - 269
Copyright
Copyright © 2002 Economic Science Association

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Footnotes

This research has benefited from the suggestions and comments of Daniel Kahneman, the research assistance of Roland Cheo and organizational help of Zeng Jinli, and was, in part, supported by the U.S. Forest Service.

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