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Buying and Selling Risk -- An Experiment Investigating Evaluation Asymmetries

Authors: Soraperra, Ivan; Ploner, Matteo; Güth, Werner;

Buying and Selling Risk -- An Experiment Investigating Evaluation Asymmetries

Abstract

Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive compatibility. Furthermore, we focus on risky goods - binary monetary lotteries - for which asymmetries in evaluations are more robust with respect to experimental procedures. For both elicitation mechanisms, the usual asymmetry in evaluation by sellers and buyers is observed. An econometric estimation sheds new light on its causes: potential buyers are over-pessimistic and systematically underweight the probability of a good outcome.

Keywords

D81 - Criteria for Decision-Making under Risk and Uncertainty, ddc:330, elicitation mechanisms, WTP-WTA gap, risk, elicitation mechanisms, probability weighting, WTP-WTA gap, Risk, Elicitation Mechanisms, Probability Weighting, C91 - Laboratory, Individual Behavior, WTP-WTA gap, D81, C91, D03 - Behavioral Microeconomics: Underlying Principles, D03, probability weighting, risk, jel: jel:D81, jel: jel:C91, jel: jel:D03

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
2
Average
Average
Average
bronze