Year: 2012
Type: report
Abstract: Experimental evidence and field data suggest that agents hold two seemingly unrelated biases: failure to account for the fact that behavior of others reflect their private information (“winner’s curse”); and a tendency to value a good more once it is owned (“endowment effect”). In this paper we propose that these two phenomena are closely related: the biases fully compensate for each other in various economic interactions, and induce an “as-if rational” behavior. We pay specific attention to barter trade, of the form that was common in prehistoric societies, and suggest that the endowment effect and winner’s curse could have jointly survived natural selection together.
Authors: Sivan Frenkel, Yuval Heller, Roee Teper
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1940870289