DP10048 Anchoring or Loss Aversion? Empirical Evidence from Art Auctions

Author(s): Kathryn Graddy, Lara Loewenstein, Jianping Mei, Mike Moses, Rachel A J Pownall
Publication Date: June 2014
Keyword(s): anchoring, art auctions, endowment effect, loss aversion
JEL(s): D03, D44, Z11
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10048

We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.