The willingness-to-accept/willingness-to-pay disparity in repeated markets: loss aversion or ‘bad-deal’ aversion?
ISONI, ANDREA
2011-01-01
Abstract
Several experimental studies have reported that an otherwise robust regularity-the disparity between Willingness-To-Accept and Willingness-To-Pay-tends to be greatly reduced in repeated markets, posing a serious challenge to existing reference-dependent and reference-independent models alike. This article offers a new account of the evidence, based on the assumptions that individuals are affected by good and bad deals relative to the expected transaction price (price sensitivity), with bad deals having a larger impact on their utility (`bad-deal' aversion). These features of preferences explain the existing evidence better than alternative approaches, including the most recent developments of loss aversion modelsItems in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.