Does Market Experience Eliminate Market Anomalies?
Top Cited Papers
- 1 February 2003
- journal article
- Published by Oxford University Press (OUP) in The Quarterly Journal of Economics
- Vol. 118 (1), 41-71
- https://doi.org/10.1162/00335530360535144
Abstract
This study examines individual behavior in two well-functioning marketplaces to investigate whether market experience eliminates the endowment effect. Field evidence from both markets suggests that individual behavior converges to the neoclassical prediction as market experience increases. In an experimental test of whether these observations are due to treatment (market experience) or selection (e.g., static preferences), I find that market experience plays a significant role in eliminating the endowment effect. I also find that these results are robust to institutional change and extend beyond the two marketplaces studied. Overall, this study provides strong evidence that market experience eliminates an important market anomaly.Keywords
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