Cognitive Consistency, the Endowment Effect and
نویسندگان
چکیده
We exhibit three non-standard cases of preference reversal (PR) between choices and valuations of bets. The endowment effect arises as a surprising consequence of the WTA/WTP disparity when the probabilities of winning get close to certainty. We consider a new theory of choice under risk, cognitive consistency (CC) theory, which can predict both standard and non-standard cases of PR, the WTA/WTP disparity and the endowment effect in the context of single choices. The experimental results strongly support CC predictions with a single parameter added to risk aversion, reject the regret theory explanation for PR and the loss aversion explanation for the endowment effect. (JEL C91, D81)
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