Sprigman and Buccafusco on Valuing Intellectual Property
We would like to start by thanking Josh for inviting us to participate in what promises to be a fascinating discussion on an important subject. We’re looking forward to engaging with the other members of the symposium.
To begin with, we would like to talk about some of our own experimental research on the valuation anomaly widely known as the “endowment effect.” Over the past quarter century, laboratory and field research in the social sciences has provided considerable evidence for the existence of a significant gap between the valuations that people attach to goods that they own and the valuations they attach to goods they are considering purchasing. Thus, in one classic and well-replicated study, subjects to whom a university coffee mug was given indicated substantially higher willingness-to-accept values than subjects who indicated their willingness-to-pay for the mug. This and similar studies suggest that aspects of goods that should be irrelevant from the perspective of neoclassical economics – such as the fact of prior ownership – can systematically bias valuations of those goods and lead to sub-optimal exchanges and inefficiencies.