Buying and selling exchange goods: Loss aversion and the endowment effect
August 1996
Article
volume 17, issue 4 pp 517-524.
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An experimental market was used to investigate whether exchange goods may be susceptible to the endowment effect. Previous research (Kahneman et al., 1990) suggested that the endowment effect will not be observed in exchange goods. The present study demonstrates that it may be observed, but only when traders are uncertain about future exchange prices. It is argued that this is a manifestation of loss aversion due to the difficulty of computing the net gains and losses of trade when exchange rates are uncertain.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- D49 : Market Structure and Pricing: Other
- C91 : Laboratory, Individual Behavior
- D81 : Criteria for Decision-Making under Risk and Uncertainty
Automatically Extracted Terms
- endowment effect
- exchange
- price
- effect
- value
- endowment
- loss aversion
- kahneman
- seller
- exchange goods
- buyer
- exchange value
- bargaining
- participant
- aversion
- exchange rates
- bargaining chip
- people
- psychology
- journal
