Disentangling endowment effect and the preferences for good deals in the presence of trade-in : an experimental analysis
The disparity between Willingness to Accept (WTA) and Willingness to Pay (WTP) is commonly explained by endowment effect, which describes pain-of-losing account. Recent literature has presented an alternative viewpoint that WTA-WTP disparity could be due to aversion to bad deals. However, there are...
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| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project |
| Language: | English |
| Published: |
2014
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/59400 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | The disparity between Willingness to Accept (WTA) and Willingness to Pay (WTP) is commonly explained by endowment effect, which describes pain-of-losing account. Recent literature has presented an alternative viewpoint that WTA-WTP disparity could be due to aversion to bad deals. However, there are no known literature that are able to disentangle these two effects. Our study presents a distinct factor that can affect the WTA-WTP disparity using the trade-in method. In a two-part experiment, we attempt to observe the changes in WTA for the loss of currently endowed goods in the presence of a trade-in option. Our results suggest that along with endowment effect and aversion to bad deals, an inclination towards good deals (good deals effect) is a factor that explains the further WTA-WTP disparity. We thus contribute to the current literature by extending another method to study WTA-WTP disparity. |
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