Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?

  title={Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?},
  author={Charles R. Plott and Kathryn Zeiler},
  journal={Boston University Law \& Economics Research Paper Series},
  • C. Plott, K. Zeiler
  • Published 1 September 2007
  • Economics, Psychology
  • Boston University Law & Economics Research Paper Series
Systematic asymmetries in exchange behavior have been widely interpreted as support for "endowment effect theory," an application of prospect theory positing that loss aversion and utility function kinks set by entitlements explain observed asymmetries. We experimentally test an alternative explanation, namely, that asymmetries are explained by classical preference theories finding influence through the experimental procedures typically used. Contrary to the predictions of endowment effect… 

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