Do not reference without permission of the authors. We conduct experiments to explore the possibility that subject misconceptions, as opposed to a particular theory of preferences referred to as the “endowment effect,” account for reported gaps between willingness to pay (“WTP”) and willingness to accept (“WTA”). Two facts are evident in the literature. First, there is no consensus regarding the nature or robustness of the WTA-WTP gap. Secondly, while experimenters are very concerned to avoid subject misconceptions, there is no consensus about their fundamental properties or how they might be avoided. Instead, experimenters have revealed different conceptions of the phenomenon through different types of experimental procedures and controls. Such controls involve the role of anonymity, elicitation mechanisms, practice, training and binding outcome experiences applied separately or in different combinations. The resulting pattern of research leaves open the possibility that the widely differing reports of a gap between WTP and WTA could be due to an incomplete science regarding

In many theories of decision under risk (e.g., expected utility theory, rank dependent utility theory, and prospect theory) the utility or value of a prospect is independent of other prospects or options in the choice set. The experiments presented here show a large effect of the available options set, suggesting instead that prospects are valued relative to one another. The judged certainty equivalent is strongly influenced by the options available. Similarly, the selection of a preferred option from a set of prospects is strongly influenced by the prospects available. Alternative theories of decision under risk (e.g., the stochastic difference model, multialternative decision field theory, and range frequency theory), where prospects themselves or prospect attributes are valued relative to one another, can provide an account of these context effects.

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Informal experimentation in economics goes back at least as far as Bernoulli (1738) (in connection with the Petersburg game), and formal reports of laboratory experiments as such have appeared for some time now (see e.g.

We investigate the effect of regret-related feedback information on bidding behavior in sealed-bid first-price auctions. Two types of regret are possible in this auction format. A winner of the auction may regret paying too much relative to the second highest bid, and a loser may regret missing an opportunity to win at a favorable price. In theory, under very general conditions, being sensitive to winning and paying too much should result in lower average bids, and being sensitive to missing opportunities to win at a favorable price should result in higher bids. For example, the US Government’s policy of revealing losing bids may cause regret-sensitive bidders to anticipate regret and bid conservatively, decreasing the government’s revenue.. We test these predictions in the laboratory and find strong support for both.

We experimentally test overconfidence in investment decisions by offering participants the possibility to substitute their own for alternative investment choices.

We study processing and acquisition of objective information regarding qualities that people care about, intelligence and beauty. Subjects receiving negative feedback did not respect the strength of these signals, were far less predictable in their updating behavior and exhibited an aversion to new information. In response to good news, inference conformed more closely to Bayes Rule, both in accuracy and precision. Signal direction did not affect updating or acquisition in our neutral control. Unlike past work, our design varied direction and agreement with priors independently. The results indicate that confirmation bias is driven by direction; confirmation alone had no effect.

Knowledge about a product’s willingness-to-pay on behalf of its (potential) customers plays a crucial role in many areas of marketing management like pricing decisions or new product development. Numerous approaches to measure willingness-to-pay with differential conceptual foundations and methodological implications have been presented in the relevant literature so far. This article provides the reader with a systematic overview of the relevant literature on these competing approaches and associated schools of thought, recognizes their respective merits and discusses obstacles and issues regarding their adoption to measuring willingness-to-pay. Because of its practical relevance, special focus will be put on indirect surveying techniques and, in particular, conjoint-based applications will be discussed in more detail. The strengths and limitations of the individual approaches are discussed and evaluated from a managerial point of view. Keywords: Willingness-to-pay, pricing, surveying techniques, conjoint measurement.

well as the three anonymous reviewers for their helpful comments. Both authors contributed equally. Questions should be directed to either Joseph C. Nunes at

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