Charles R. Plott

Who they are

Plott and Zeiler's 2005 paper in the American Economic Review argued that reported gaps between willingness to accept and willingness to pay could come from participants misunderstanding the valuation task. They combined anonymity, an incentive-compatible elicitation method, paid practice and training, and with mugs they observed no gap between selling and buying prices.

Their 2007 paper reported that exchange asymmetries were absent under their modified procedures and reappeared under traditional ones. In 2011 Andrea Isoni, Graham Loomes and Robert Sugden reported no mug gap under similar procedures but a persistent gap for lotteries. Plott and Zeiler replied in the same issue that all the mug data reject endowment effect theory, and that the lottery gaps reflect unstable attitudes towards uncertainty and beliefs influenced by whether a buying or selling price is reported.

Key papers

Plott, C. R., & Zeiler, K. (2005). "The willingness to pay-willingness to accept gap, the 'endowment effect,' subject misconceptions, and experimental procedures for eliciting valuations." American Economic Review, 95(3), 530-545. doi:10.1257/0002828054201387.

Plott, C. R., & Zeiler, K. (2007). "Exchange asymmetries incorrectly interpreted as evidence of endowment effect theory and prospect theory?" American Economic Review, 97(4), 1449-1466. doi:10.1257/aer.97.4.1449.

Plott, C. R., & Zeiler, K. (2011). "The willingness to pay-willingness to accept gap, the 'endowment effect,' subject misconceptions, and experimental procedures for eliciting valuations: reply." American Economic Review, 101(2), 1012-1028. doi:10.1257/aer.101.2.1012.

Key ideas

The size of the gap between selling and buying prices depends on how valuations are elicited. See Endowment Effect.

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