Hostname: page-component-7b9c58cd5d-9klzr Total loading time: 0 Render date: 2025-03-17T08:33:17.268Z Has data issue: false hasContentIssue false
  • English
  • Français

Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations

Published online by Cambridge University Press:  14 March 2025

Fabio Tufano
Fabio Tufano*
Affiliation:
Dipartimento di Economia, Università degli Studi dell’Insubria, Via Monte Generoso 71, 21100 Varese, Italy CeDEx, Nottingham School of Economics, Nottingham, UK
*
e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when—by design—individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.

Keywords

AuctionsValuationsEconomic principlesAnomaliesExperimentsSocial interactions

JEL classification

D01: Microeconomic Behavior: Underlying Principles D44: Auctions C92: Laboratory, Group Behavior
Type
Research Article
Information
Experimental Economics , Volume 13 , Issue 1 , March 2010 , pp. 1 - 13
Copyright
Copyright © Economic Science Association 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic supplementary material The online version of this article (http://dx.doi.org/10.1007/s10683-009-9226-8) contains supplementary material, which is available to authorized users.

References

Ariely, D., Loewenstein, G., & Prelec, D. (2003). Coherent arbitrariness: stable demand curves without stable preferences. Quarterly Journal of Economics, 118(1), 73–105.CrossRefGoogle Scholar
Bernheim, B. D., & Rangel, A. (2007). Behavioral public economics: welfare and policy analysis with non-standard decision-makers. In Diamond, P. & Vartiainen, H. (Eds.), Behavioral economics and its applications (pp. 7–77). Princeton: Princeton University Press.CrossRefGoogle Scholar
Braga, J., Humphrey, S. J., & Starmer, C. (2009). Market experience eliminates some anomalies—and creates new ones. European Economic Review, 53(4), 401–416.CrossRefGoogle Scholar
Camerer, C. (1995). Individual decision making. In Kagel, J. H. & Roth, A. E. (Eds.), The handbook of experimental economics (pp. 587–703). Princeton: Princeton University Press.CrossRefGoogle Scholar
Camerer, C., Issacharoff, S., Loewenstein, G., O’Donoghue, T., & Rabin, M. (2003). Regulation for conservatives: behavioral economics and the case for asymmetric paternalism. University of Pennsylvania Law Review, 151(3), 1211–1254.CrossRefGoogle Scholar
Chapman, G. B., & Johnson, E. (2002). Incorporating the irrelevant: anchors in judgments of belief and value. In Gilovich, T., Griffin, D. W. & Kahneman, D. (Eds.), Heuristics and biases: the psychology of intuitive judgment (pp. 120–138). New York: Cambridge University Press.CrossRefGoogle Scholar
Cooper, D. J., & Rege, M. (2008). Social interaction effects and choice under uncertainty: an experimental study. Mimeo.Google Scholar
Durlauf, S. (2004). Neighborhood effects. In Henderson, J. V. & Thisse, J.-F. (Eds.), The handbook of regional and urban economics (Vol. 4, pp. 2173–2242). Amsterdam: North-Holland.Google Scholar
Glaeser, E. L. (2006). Paternalism and psychology. University of Chicago Law Review, 73(1), 133–156.Google Scholar
Goeree, J. K., & Yariv, L. (2007). Conformity in the lab. Mimeo.Google Scholar
Harrison, G. W., Harstad, R. H., & Rustrom, E. E. (2004). Experimental methods and elicitation of values. Experimental Economics, 7(2), 123–140.CrossRefGoogle Scholar
Knetsch, J., Tang, F. F., & Thaler, R. (2001). The endowment effect and repeated market trials: is the Vickrey auction demand revealing? Experimental Economics, 4(3), 257–269.CrossRefGoogle Scholar
List, J. A. (2003). Does market experience eliminate market anomalies? Quarterly Journal of Economics, 118(1), 41–71.CrossRefGoogle Scholar
Loomes, G., Starmer, C., & Sugden, R. (2003). Do anomalies disappear in repeated markets? Economic Journal, 113(486), C153–C166.CrossRefGoogle Scholar
Lusk, L., & Shogren, J. F. (2007). Experimental auctions: methods and applications in economic and marketing research. New York: Cambridge University Press.CrossRefGoogle Scholar
Marsh, B. (2002). Heuristics as social tools. New Ideas in Psychology, 20(1), 49–57.CrossRefGoogle Scholar
Plott, C. R. (1996). Rational individual behaviour in market and social choice processes: the discovered preference hypothesis. In Arrow, H. J., Colombatto, E., Perlman, M. & Schmidt, C. (Eds.), The rational foundations of economic behaviour (pp. 225–250). London: Macmillan.Google Scholar
Slovic, P., Griffin, D., & Tversky, A. (2002). Compatibility effects in judgement and choice. In Gilovich, T., Griffin, D. W. & Kahneman, D. (Eds.), Heuristics and biases: the psychology of intuitive judgment (pp. 217–229). New York: Cambridge University Press.CrossRefGoogle Scholar
Shogren, J. F. (2006). Valuation in the lab. Environmental and Resource Economics, 34(1), 163–172.CrossRefGoogle Scholar
Starmer, C. (2000). Developments in non-expected utility theory: the hunt for a descriptive theory of choice under risk. Journal of Economic Literature, 38(2), 332–382.CrossRefGoogle Scholar
Thaler, R. H., & Sunstein, C. R. (2003). Libertarian paternalism. American Economic Review, 93(2), 175179.CrossRefGoogle Scholar
Todd, P. M., Rieskamp, J., & Gigerenzer, G. (2008). Social heuristics. In Plott, C. R. & Smith, V. L. (Eds.), Handbook of experimental economics results (Vol. 1, pp. 1035–1046). Amsterdam: North-Holland.CrossRefGoogle Scholar
Supplementary material: File

Tufano supplementary material

Supplementary Material A. Subjects' Booklet
Download Tufano supplementary material(File)
File 165.8 KB
Supplementary material: File

Tufano supplementary material

Supplementary Material B. Experimental Data
Download Tufano supplementary material(File)
File 72.2 KB