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Isoni, Loomes, and Sugden (2011) assert that Plott and Zeiler (2005) reported inaccurate results. Placing ILS's selective quotes into context demonstrates otherwise. Additionally, examining the data closely yields three conclusions. First, all mug data reject endowment effect theory. Second, lottery gaps are associated with unstable attitudes toward uncertainty, a finding consistent with PZ's (2005) lottery data description, explicit warnings about procedure limitations and the data supplement, which reports the lottery data and cautions. Third, lottery outcome beliefs are influenced by whether WTP or WTA is reported, suggesting that changing beliefs, as opposed to the shape of preferences, produce lottery gaps. (JEL C91)

Systematic asymmetries in exchange behavior have been widely interpreted as support for "endowment effect theory," an application of prospect theory positing that loss aversion and utility function kinks set by entitlements explain observed asymmetries. We experimentally test an alternative explanation, namely, that asymmetries are explained by classical preference theories finding influence through the experimental procedures typically used. Contrary to the predictions of endowment effect theory, we observe no asymmetries when we modify procedures to remove the influence of classical preference theories. When we return to traditional-type procedures, however, the asymmetries reappear. The results support explanations based in classical preference theories and reject endowment effect theory. (JEL D01)

We conduct experiments to explore the possibility that subject misconceptions, as opposed to a particular theory of preferences referred to as the "endowment effect," account for reported gaps between willingness to pay ("WTP") and willingness to accept ("WTA"). The literature reveals two important facts. First, there is no consensus regarding the nature or robustness of WTP-WTA gaps. Second, while experimenters are careful to control for subject misconceptions, there is no consensus about the fundamental properties of misconceptions or how to avoid them. Instead, by implementing different types of experimental controls, experimenters have revealed notions of how misconceptions arise. Experimenters have applied these controls separately or in different combinations. Such controls include ensuring subject anonymity, using incentive-compatible elicitation mechanisms, and providing subjects with practice and training on the elicitation mechanism before employing it to measure valuations. The pattern of results reported in the literature suggests that the widely differing reports of WTP-WTA gaps could be due to an incomplete science regarding subject misconceptions. We implement a "revealed theory" methodology to compensate for the lack of a theory of misconceptions. Theories implicit in experimental procedures found in the literature are at the heart of our experimental design. Thus, our approach to addressing subject misconceptions reflects an attempt to control simultaneously for all dimensions of concern over possible subject misconceptions found in the literature. To this end, our procedures modify the Becker-DeGroot-Marschak mechanism used in previous studies to elicit values. In addition, our procedures supplement commonly used procedures by providing extensive training on the elicitation mechanism before subjects provide WTP and WTA responses. Experiments were conducted using both lotteries and mugs, goods frequently used in endowment effect experiments. Using the modified procedures, we observe no gap between WTA and WTP. Therefore, our results call into question the interpretation of observed gaps as evidence of loss aversion or prospect theory. Further evidence is required before convincing interpretations of observed gaps can be advanced.

Since ancient times, legal scholars have explored the vexing question of when and what a contracting party must disclose to her counterparty, even in the absence of explicit misleading statements. This fascination has culminated in a set of claims regarding which factors drive courts to impose disclosure duties on informed parties. Most of these claims are based on analysis of a small number of non-randomly selected cases and have not been tested systematically. This article represents the first attempt to systematically test a number of these claims using data coded from 466 case decisions spanning over a wide array of jurisdictions and covering over 200 years. The results are mixed. In some cases it appears that conventional wisdom is correct. For example, our data support the claim that courts are more likely to require disclosure of latent, as opposed to patent, defects. In addition, courts are more likely to require full disclosure between parties in a fiduciary or confidential relationship. On the other hand, our results cast doubt on much of the conventional wisdom regarding the law of fraudulent silence. Indeed, our results challenge ten of the most prominent theories that have been asserted to explain when courts will require disclosure. We find that courts are no more likely to impose disclosure duties when the information is casually acquired as opposed to deliberately acquired and that unequal access to information by the contracting parties is not a significant factor that drives courts to require disclosure. We do find, however, that when these two factors are present simultaneously courts are significantly more likely to force disclosure. Perhaps most interestingly, although it is generally understood that courts have become more likely to impose disclosure duties over time, we find that courts actually have become less likely to require disclosure over time.