English
 
Help Privacy Policy Disclaimer
  Advanced SearchBrowse
  1. View item / 
  2. Item Summary

Item

ITEM ACTIONSEXPORT
Add to Basket
  Local TagsRelease HistoryDetailsSummary

Released
Journal Article

Testing the Endowment Effect for Default Rules

MPS-Authors
/persons/resource/persons183171

Marcin,  Isabel
Max Planck Institute for Research on Collective Goods, Max Planck Society;

/persons/resource/persons183176

Nicklisch,  Andreas
Max Planck Institute for Research on Collective Goods, Max Planck Society;

External Resource

https://doi.org/10.1515/rle-2016-0010
(Any fulltext)

Fulltext (restricted access)
There are currently no full texts shared for your IP range.
Fulltext (public)
There are no public fulltexts stored in PuRe
Supplementary Material (public)
There is no public supplementary material available
Citation

Marcin, I., & Nicklisch, A. (2017). Testing the Endowment Effect for Default Rules. Review of Law and Economics.


Cite as: https://hdl.handle.net/11858/00-001M-0000-002C-CA7A-C
Abstract
This paper explores potential endowment effects of contractual default rules. For this purpose, we analyze the Hadley liability default clause in a model of bilateral bargaining of lotteries against safe options. The liability default clause determines the right for the safe payoff option. We test the model in series of laboratory experiments. The results reveal a substantial willingness-to-accept to willingness-to-pay gap for the right to change lotteries against safe options. Even if we apply the incentive compatible Becker-DeGroot-Marschak value elicitation mechanism, there is a significant gap indicating a robust endowment effect caused by default rules. Differences of expected values of the lotteries and the safe options consistently decrease the gaps. Implications for applications of default rules in the law are discussed.