Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences

  title={Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences},
  author={Lorenz Goette and Annette Harms and Charles Sprenger},
  journal={Behavioral \& Experimental Economics eJournal},
We test expectations-based reference dependence in market experiments with probabilistic forced exchange. Kőszegi and Rabin (2006) predict that when the probability of forced exchange increases, individuals cannot expect to stick with the status quo, and should grow more willing to exchange. This mechanism may eliminate and even reverse the “endowment effect” (Knetsch and Sinden 1984; Kahneman, Knetsch, and Thaler 1990). In a series of experiments with overall 930 subjects, we show some… 

Price Expectations and Reference-Dependent Preferences

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