The effect of anonymity on the WTA - WTP gap in endowment effect games

Abstract

I conducted experiments to determine whether anonymity affects the gap between the willingness to accept (WTA) and willingness to pay (WTP) in endowment effect games. Plott and Zeiler (2005) theorize complete anonymity is necessary to eliminate the contamination of “signaling” within the endowment effect game. The “signaling” results when buyers over-value their items and sellers under-value the items they are trading for to signal they are good bargainers, which leads to suboptimal decisions. I find that the difference between a Plott and Zeiler style treatment and a highly anonymous Plott and Zeiler treatment yield WTA – WTP gaps that are not statistically significant. I utilize a Hoffman, et al. (1996) style dictator game to ensure my anonymity procedure is sufficient.