Salience in Experimental Tests of the Endowment Effect
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.
We are grateful to Dmitry Taubinsky for extremely helpful comments. Gennaioli thanks the Spanish Ministerio de Ciencia y Tecnologia (ECO 2008-01666 and Ramon y Ca jal grants), the Barcelona GSE Research Network and the Generalitat de Catalunya for financial support. Shleifer thanks the Kauffman Foundation for research support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2012. "Salience in Experimental Tests of the Endowment Effect," American Economic Review, American Economic Association, vol. 102(3), pages 47-52, May. citation courtesy of