EXPERIMENTAL TESTS OF THE ENDOWMENT EFFECT AND THE COASE THEOREM

@inproceedings{Kahneman1990EXPERIMENTALTO,
  title={EXPERIMENTAL TESTS OF THE ENDOWMENT EFFECT AND THE COASE THEOREM},
  author={Daniel Kahneman and Jack L. Knetsch and Richard H. Thaler},
  year={1990}
}
Contrary to theoretical expectations, measures of willingness to accept greatly exceed measures of willingness to pay. This paper reports several experiments that demonstrate that this "endowment effect" persists even in market settings with opportunities to learn. Consumption objects (e.g., coffee mugs) are randomly given to half the subjects in an experiment. Markets for the mugs are then conducted. The Coase theorem predicts that about half the mugs will trade, but observed volume is always… CONTINUE READING

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