When the Shoe is on the Other Foot: Experimental Evidence on Valuation DisparitiesFaculty Publications
DepartmentEconomics, Finance, & Quantitative Analysis
AbstractThe method of elicitation has an important effect on valuations. We investigate the effect of perspective on decision makers' elicited values. We conduct experimental sessions in which participants act as sellers or buyers, and replicate the disparity between willingness to accept and willingness to pay: sellers want to collect more, and buyers want to pay less. We conduct additional sessions in which endowed decision makers provide values that are used to determine a price at which anonymous others transact. In these sessions, decision makers' experimental earnings are not affected by valuations but, rather, are determined by their endowment. Decision makers appear to consider their standing relative to anonymous others in providing valuations (i.e., decision makers' endowments affect their valuations). The results indicate that the disparity between willingness to accept and willingness to pay disappears when decision makers' endowments ensure that they are at least as well off as anonymous others.
Citation InformationAckert, Lucy F., Bryan K. Church, and Gerald P., Jr. Dwyer. "When the Shoe Is on the Other Foot: Experimental Evidence on Valuation Disparities." Public Finance Review 35.2 (2007): 199-214.