Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations |
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Authors: | Fabio Tufano |
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Institution: | 1.Dipartimento di Economia,Università degli Studi dell’Insubria,Varese,Italy;2.CeDEx,Nottingham School of Economics,Nottingham,UK |
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Abstract: | This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the
price observed in previous market periods when—by design—individuals’ values should not be affiliated with the market price.
This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance
of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed,
market behaviour does not reveal the underlying true preferences but rather context-dependent preferences. |
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