Presentation is loading. Please wait.

Presentation is loading. Please wait.

Monetary Valuations in Repeated Markets: Do Prices Matter? Andrea Isoni CREED-CEDEX-UEA Meeting on Experimental Economics Amsterdam, 5 th and 6 th June.

Similar presentations


Presentation on theme: "Monetary Valuations in Repeated Markets: Do Prices Matter? Andrea Isoni CREED-CEDEX-UEA Meeting on Experimental Economics Amsterdam, 5 th and 6 th June."— Presentation transcript:

1 Monetary Valuations in Repeated Markets: Do Prices Matter? Andrea Isoni CREED-CEDEX-UEA Meeting on Experimental Economics Amsterdam, 5 th and 6 th June 2008 Joint with: P. Brooks, G. Loomes and R. Sugden

2 Outline 1. The issues 2. Research questions 3. The Experiment 4. Results 5. Conclusion

3 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion Anomalies reduced in markets WTA/WTP disparity (e.g. Coursey et al., 1987; Shogren et al., 1994, 2001; Loomes et al., 2003, 2007) Preference reversal (Cox and Grether, 1996; Braga et al., 2006) Shaping effects Decay compatible with price following (e.g. Shogren et al., 2001; Cox and Grether, 1996; Knetsch 2001, Loomes et al., 2003,) Anchoring Anchoring manipulations persist after market repetition (Ariely et al., 2003) Price sensitivity and bad-deal aversion A model with in-built shaping effects (Isoni, 2008) The issues

4 Do market prices shape valuations? Does market interaction eliminate the effect of external manipulations? Shaping effects Anchoring General ability of repeated markets to reveal consistent preferences Research questions 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

5 Median-price selling auctions repeated 8 times Lottery tickets 5/7 players The Experiment asks a1a1 a2a2 a3a3 a4a4 a5a5 a6a6 a7a7 Sell itemDo not sell item 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion Test 1Test 2Test 3 Mixed marketsHomogeneous markets High/low prompt markets Shaping effectsPersistence of shaping Persistence of anchoring A median price selling auction with 7 traders

6 TEST 1: MIXED MARKETS Valuations constrained to ranges of prizes Max 3 values below £7 Max 3 values above £9 Price constrained between £7 and £9 (more) High feedback for L traders – shape up Low feedback for H traders – shape down Compare to control markets (all same lottery) The Experiment 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion Low-lottery (L) Medium-lottery (M) High-lottery (H) (£2, 0.8; £9, 0.2)(£7, 0.5; £9, 0.5)(£7, 0.2; £14, 0.8) 3 traders1 trader3 traders

7 Controlling price feedback in mixed markets The Experiment £ L = (£2, 0.8; £9, 0.2) H = (£7, 0.2; £14, 0.8) M = (£7, 0.5; £9, 0.5) Market price Artificially high feedback Artificially low feedback 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

8 TEST 2: HOMOGENEOUS MARKETS Traders from mixed markets re-matched according to lottery Compare to control markets TEST 3: HIGH/LOW PROMPT MARKETS Anchoring manipulation before market starts E = (£1, 0.95; £50, 0.05) High vs. low prompt: do they converge? The Experiment 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion High promptLow Prompt £20 or more£1 to £2 £19.90 to £15£2.10 to £3 £14.90 to £10£3.10 to £4 £9.90 to £5£4.10 to £5 £4.90 to £1£5.10 or more Predict price from range

9 Lab: Social Science for the Environment Virtual Reality and Experimental Laboratories (SSEVREL) of the University of East Anglia Sessions: 18 overall Participants: 204 subjects from general student population Duration: about 1 hour 20 minutes per session Earnings: £7.50 on average Software: z-Tree (Fischbacher, 2007) Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

10 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

11 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

12 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

13 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

14 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

15 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

16 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

17 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

18 To recap TEST 1 Large shaping effects, stronger when feedback is artificially high (L) than when it is low (H) Asymmetry compatible with bad-deal aversion - when price is high, valuations pulled up to avoid bad deals (L) - when price is low, valuations pulled downwards to make good deals (H) TEST 2 Strong de-shaping for high feedback (L), but still significant difference after 8 rounds General persistence for low feedback (H) Some tendency to underlying values/market discipline? Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

19 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

20 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

21 Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

22 To recap TEST 3 Strong and persistent effect of prompt on valuations Effect possibly reinforced by group-specific feedback (a form of shaping?) - valuations not significantly different across trading groups in period 1 - significant differences arise in last period Results 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

23 Monetary valuations are malleable - Via price feedback (especially if high) - Via anchoring manipulations Market forces do not eliminate these effects - Shaping effects mostly persist when feedback is artificially low, and are somewhat eroded when it is artificially high - Anchoring effects persist and are possibly reinforced through group-specific feedback Prices DO matter in markets Markets do not necessarily reveal consistent preferences (provided such preferences exist) Conclusion 1. The issues 2. Research questions 3. The experiment 4. Results 5. Conclusion

24 Thank you!


Download ppt "Monetary Valuations in Repeated Markets: Do Prices Matter? Andrea Isoni CREED-CEDEX-UEA Meeting on Experimental Economics Amsterdam, 5 th and 6 th June."

Similar presentations


Ads by Google