Published and Forthcoming Papers
Exchange and Specialisation as a Discovery Process, with Vernon Smith and Bart Wilson, The Economic Journal, accepted for publication.Working Papers
A Bias Towards Increased Trade Under Reference Dependent Preferences.The endowment effect is a well-known behavioral regularity whereby a person values a good more when he is endowed with it. In their generalization of prospect theory to consumption bundles with multiple attributes, Tversky and Kahneman [1991] imply the endowment effect as a consequence of loss aversion and diminishing sensitivity in gains. It has since frequently been presumed that this form of reference dependent preferences will inhibit trade. However, in this paper it is demonstrated that loss aversion and diminishing sensitivity in gains also imply a dynamic momentum trading effect that increases exchange, so the net effect of such preferences on trading volume is ambiguous. In fact, the momentum effect is shown to completely cancel out the endowment effect in an important class of examples.
Work in Progress
"Lucas in the Laboratory," with John Duffy.Experimental Data, Results, and Instructions
Learning Competitive Equilibrium in Laboratory Exchange Economies