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Exchange asymmetries for bads? Experimental evidence

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  • Dertwinkel-Kalt, Markus
  • Köhler, Katrin
Abstract
This study provides the first incentivized test of exchange asymmetries for unpleasant items, the so-called bads. While prospect theory predicts an endowment effect for goods and bads, attention-based theories predict an endowment effect for goods, but a reverse exchange asymmetry (that is, a particularly high willingness to switch) for bads. The investigation of exchange asymmetries for bads is a key element to distinguish between the validity of loss aversion- and attention-based theories. As we find a strong endowment effect for bads, our results speak in favor of prospect theory.

Suggested Citation

  • Dertwinkel-Kalt, Markus & Köhler, Katrin, 2016. "Exchange asymmetries for bads? Experimental evidence," European Economic Review, Elsevier, vol. 82(C), pages 231-241.
    • Handle: RePEc:eee:eecrev:v:82:y:2016:i:c:p:231-241
    DOI: 10.1016/j.euroecorev.2015.12.003
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    Cited by:

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    4. Adrian Bruhin & Maha Manai & Luis Santos-Pinto, 2019. "Risk and Rationality:The Relative Importance of Probability Weighting and Choice Set Dependence," Cahiers de Recherches Economiques du Département d'économie 19.01new, Université de Lausanne, Faculté des HEC, Département d’économie.
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    More about this item

    Keywords

    Loss aversion; Prospect theory; Salience theory; Endowment effect;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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