Possession, feelings of ownership and the endowment effect
Jochen Reb1
Singapore Management University
Terry Connolly
University of Arizona
Judgment and Decision Making,
vol. 2, no. 2, April 2007, pp. 107-114.
Abstract
Research in judgment and decision making generally ignores the
distinction between factual and subjective feelings of
ownership, tacitly assuming that the two correspond closely.
The present research suggests that this assumption might be
usefully reexamined. In two experiments on the endowment effect
we examine the role of subjective ownership by independently
manipulating factual ownership (i.e., what participants were
told about ownership) and physical possession of an object. This allowed
us to disentangle the effects of these two factors, which are
typically confounded. We found a significant effect of
possession, but not of factual ownership, on monetary valuation
of the object. Moreover, this effect was mediated by
participants' feelings of ownership, which were enhanced by the
physical possession of the object. Thus, the endowment effect
did not rely on factual ownership per se but was the result of
subjective feelings of ownership induced by possession of the
object. It is these feelings of ownership that appeared to
lead individuals to include the object into their endowment and
to shift their reference point accordingly. Potential
implications and directions for future research are discussed.
Keywords: decision making; endowment effect; possession; psychological
ownership, subjective ownership.
1 Introduction
Thaler (1980) presented half the students in a class with Cornell
University coffee mugs and then allowed them to trade with their less
fortunate classmates. Surprisingly little trading occurred. Those
holding the mugs set their minimum selling prices too high, and those
without mugs set their maximum offers too low, for many trades to
clear. Apparently, briefly owning a coffee mug raised its value to the
owner sufficiently to price it beyond the reach of most non-owners.
Thaler coined the term endowment effect to describe the
result: goods that are included in one's endowment -
that is, goods that one owns - are valued more highly than identical
goods not held in the endowment. The non-owner's
potential gain from acquisition was apparently smaller than the
owner's potential loss from sale. The effect has since
been widely replicated (e.g., Kahneman, Knetsch, & Thaler, 1990;
Kahneman, Knetsch, & Thaler, 1991).
The endowment effect is commonly interpreted as the result of
loss aversion, a core ingredient of prospect theory (Kahneman
& Tversky, 1979). Losses (outcomes below some reference point) are
weighted substantially more than gains (outcomes above the reference
point) in the evaluation of choice options (Kahneman & Tversky, 1984).
If one initially owns an object, the prospect of losing it is seen as a
(relatively large) loss. If one does not, the prospect of acquiring it
is seen as a (relatively small) gain. Hence the small volume of trading
in Thaler's study: The endowment shifted reference
points, and thus the assessment of what is a loss and what a gain.
More recently, researchers have started to examine
in more detail the psychological mechanisms driving the effect. For
example, Strahilevitz and Loewenstein (1998) found that valuation of an
object can increase with duration of ownership, possibly due to
increased adaptation, the psychological
accustoming to the new material situation. Novemsky and Kahneman
(2005a, b) present evidence that loss aversion, and thus an endowment
effect, is found for goods that are owned for consumption, but not for
goods that are owned for exchange, and that are thus given up
"as intended" rather than as
losses from an endowment. Carmon and Ariely (2000) report findings
suggesting that endowment effects can be explained as the result of
buyers and sellers having different cognitive perspectives on the
exchange. These results suggest that there is more to the endowment
effect than simple factual ownership of an object.
In the present research, we try to elucidate further what leads to the
development of a sense of endowment and, subsequently, to higher
monetary valuations. The concept of ownership of one's
endowment of goods appears to involve two elements, legal entitlement
and subjective ownership. These elements may be imperfectly correlated.
One may feel some sense of ownership of items one does not own (e.g., a
borrowed bicycle) and behave as an owner might (e.g., resenting the
owner's demand for its return). Conversely, one may
feel little ownership of items one does, in fact, own (e.g., a
newly-bought computer) and require some period of experience and use
before feeling full ownership. Pierce, Kostova and Dirks (2003) propose
an elaborate psychological model, based on an extensive literature
review, of the antecedents, experiences, and consequences of
psychological or subjective ownership (see Belk,
1988; Dittmar, 1992; Furby, 1978). This research suggests that
subjective feelings of ownership are more complex than simple legal
entitlement (Etzioni, 1991). In the Pierce et al model feelings of
ownership are induced by controlling the entity (e.g., through
possession), becoming familiar with it (e.g., through actual or
imagined use) and/or investing the self into it (e.g., through
identification).
In Thaler (1980), as in most studies of the endowment effect, two of
these elements of ownership are confounded. It seems clear that the
students who received the mugs understood that they legally owned them
and could, if they wished, sell them to others. They also were given
physical possession of the mugs and could inspect and control them. The
extent to which these elements led to feelings of subjective ownership
is unclear. Possession alone, even in the absence of factual ownership,
can induce feelings of ownership (Etzioni, 1991; Furby, 1980). Indeed,
because of the immediate control it provides over the entity,
possession might be more psychologically salient and have a stronger
effect on feelings of ownership of an object (and thus on its monetary
evaluation) than does factual ownership (Pierce et al., 2003; Rudmin &
Berry, 1987).
In the following two experiments we examine the relative contributions
of factual and subjective ownership to the endowment effect by
separately manipulating factual ownership and possession of an object.
This design allows examining whether the
endowment effect is driven by (a) factual
ownership, (2) possession, or (3) both. We expect that possession will
induce stronger feelings of ownership than pure factual ownership as
such. We are arguing that it is this subjective
sense of endowment - rather than a legal entitlement - that leads to
a shift in the reference point and makes not having the object feel
like a loss, rather than a foregone gain. As a
result possession will lead to higher monetary evaluation, whereas
factual ownership by itself will not.
2 Experiment 1
2.1 Method
2.1.1 Design, procedure, manipulations, and measures
The experiment had a 2 (Ownership vs. No Ownership) x 2 (Possession vs.
No Possession) between-subjects design. The object to be evaluated was
a chocolate bar of a brand familiar to the participants. We assessed
monetary valuations as our dependent variable and feelings of ownership
as a potential mediator.
Participants in the Possession condition were given the chocolate bar
before participating in an unrelated study that took about 30 minutes.
They were handed the chocolate bar and told to keep it for now (and not
to eat it) as it would be used later on in the study; they then placed
it on the desk next to their computers. In the No Possession condition
participants were shown the chocolate bar only after participating in
the unrelated study. They were not given possession of the item and
they had no physical contact with it. After completing the unrelated
study participants in the Ownership condition were told that they now
owned a chocolate bar (either the one on their desk or one just like
the one they had been shown) and that they could either keep it or
exchange it for some money. Those in the No Ownership condition were
told that they now had a choice of receiving either a chocolate bar or
some money. All participants then completed a response sheet which
presented a series of choices between the chocolate bar and amounts of
money rising from $.10 to $4.00 in steps of 10 cents. Respondents
indicated their preference at each money amount. (All money amounts
were given in the local currency, Singapore dollars, worth at the time
about .60 $US.)
The experiment thus compares the preferences of the following
groups: those who own a chocolate bar but may, if they wish,
exchange it for money; and those who do not own a bar but are
offered a choice of either acquiring one or receiving a sum of
money.2 At the time of making this choice half the
participants had possessed the bar in the sense that they had
received it from the experimenter and placed it on their desks
for about 15-30 minutes. The other participants had not had this
prior possession. As in previous studies (e.g., Strahilevitz &
Loewenstein, 1998) incentive compatibility was maintained by
telling the participants that the experimenter had previously
written down an amount of money and that participants would
receive either money or the chocolate bar depending on the choice
they had indicated on their response sheet for this amount. Thus
both under-bidders and over-bidders faced the risk of receiving
their less-preferred option. Only honest valuations escape this
concern.
All participants in a given session received the same possession
treatment to rule out possible social comparison effects between
participants. Each session included about 8 of the 99
participants, and sessions alternated between Possession and No
Possession conditions. Participants indicated their valuations
on the response sheet and then responded to additional questions
including (1) a measure of feelings of ownership ("How much do
you feel like you own the chocolate bar (even if you don't
legally own it)?") and (2) a measure of information about the
object ("How much information do you think you have in order to
evaluate the chocolate bar?"), both on 7-point scales. The
experimenter then revealed his preset valuation, and participants
either kept or received a chocolate bar or were given the amount
of money (and had to return the chocolate bar), depending on the
choice they had indicated on their response sheets.
2.1.2 Participants
Ninety-nine undergraduate students at a Singaporean university
participated as part of a larger experiment session in exchange for
course credit and task payoffs as described above.
2.1.3 Stimulus pretest
One might be concerned that the experimental manipulations of
ownership and possession are confounded with the information
participants received about the object, which could affect
monetary valuation. However, given that a chocolate bar is a
simple and familiar object we did not anticipate any differences
between experimental conditions in the amount of product
information participants had. Participants' self-ratings
confirmed this. Judgments of whether they had sufficient
information to evaluate the chocolate bar (average rating of
M = 4.16, (SD = 2.03), on a 1-7 scale with
higher values indicating more information) showed no significant
difference between the two possession conditions, F(1,
90) = 1.57, ns, prep = .72,
w = .01, or between the two
ownership conditions, F(1, 90) = .40,
ns, prep = .48,
w.00.
2.2 Results and discussion
2.2.1 Replication of endowment effect
The typical endowment effect experiment compares
an individual who both owns and possesses the object with one who
neither owns nor possesses it. When comparing these two cells of our
experiment we found a significant effect, F(1, 47) = 4.83,
p .05, prep = .90,
w = .07. Those who were endowed
with the object (i.e., owned and possessed it) gave higher monetary
valuations, M = $1.79 (SD = .96), than those who
were not endowed with the object (i.e., neither owned nor possessed
it), M = $1.29 (SD = .55). Thus, the endowment
effect was replicated.3
2.2.2 The relative roles of factual ownership and
possession in the endowment effect
Was the endowment effect due to factual ownership of the object,
possession, or both? A 2 (Ownership) x 2 (Possession) ANOVA showed a
significant main effect only for possession, F(1, 95) = 5.10,
p .05, prep = .92,
w = .04 (see Figure 1).
Participants gave the chocolate bar a higher monetary
value when they had possessed it (M =
$1.72, SD = .92) than when they had not possessed it
(M = $1.35, SD = .66). The effect of actual
ownership was not significant (ownership, M = 1.60,
SD = .88, no ownership, M = 1.47, SD = .76),
F(1, 95) = .64, ns, prep =
.56, w= .00, and there was no
evidence of a significant interaction, F(1, 95) = .00,
ns, prep = .12,
w= .00. These results suggest
that the differences in valuation that constitute the endowment effect
were induced by possession, and subsequent feelings of ownership,
rather than by ownership of the focal object as such.
Figure 1: Effects of factual ownership and possession on
monetary valuation, Experiment 1.
(Error bars indicate 1 standard error of the mean.)
2.2.3 The Role of Feelings of Ownership
We next examined the possible mediating role of subjective feelings of
ownership in linking possession to valuation. A 2 (Ownership) x 2
(Possession) ANOVA revealed a significant effect of possession on
subjective ownership. As predicted, participants who had the chocolate
bar in their possession felt stronger ownership (M = 4.34,
SD = 2.13) than those who did not (M = 2.60,
SD = 1.86), F(1, 90) = 17.75, p .001,
prep = .999,
w= .15, (see Figure 2). As with
valuations, we found no effect of factual ownership, F(1, 90)
= .09, ns, prep = .30,
w= .00, and no significant
interaction F(1, 90) = .94, ns,
prep = .62,
w= .00.
Feelings of ownership, in turn, predicted monetary valuations.
Regressing monetary valuations on feelings of ownership showed that
stronger feelings of ownership were related to higher monetary
valuations, B = .12, SE(B) = .04,
b = .33, t(92) = 3.35, p
.01, adjusted R = .10. In order to test for
mediation, we regressed participants' monetary
valuations on both the experimental manipulation of possession and the
presumed mediator (feelings of ownership). Results showed that feelings
of ownership continued to predict monetary valuation,
b = .29, t(90) = 2.64, p
.05, whereas the experimental manipulation did not, b
= .11, t(90) = .99, p = .32, ns. A Sobel
test of mediation was significant, z = 2.24, p
.05. Thus, we found that feelings of ownership fully
mediated the effect of possessing the chocolate bar on the monetary
valuation of the item.
Figure 2: Effects of factual ownership and possession on
feelings of ownership, Experiment 1.
In sum, Experiment 1 indicates that the sense of endowment that leads to
higher monetary valuations results from the feelings of ownership
induced by possessing an object, rather than
legal ownership as such. Experiment 2 provides a conceptual
replication, extending the first experiment to (a) a different object
of choice, (b) an alternative measure of the dependent measure, and (c)
a different, and briefer, implementation of the concept of
"possession."
3 Experiment 2
Experiment 2 was designed to provide a conceptual
replication of the findings of Experiment 1. The design was again a 2
(Ownership vs. No Ownership) x 2 (Possession vs. No Possession)
between-subjects design. The procedure, design, and materials were
identical to Experiment 1 except for the differences noted below.
One purpose of Experiment 2 was to see if the
results would replicate with a different object. For this experiment,
we chose the object that has probably been used most commonly in
endowment effect studies: a coffee mug from the
participants' university. This object was rather
different from the chocolate bar used in Experiment 1, being more
durable, non-hedonic, and of higher price. To accommodate for the
higher value, the new response sheet gave amounts of money rising from
$.20 to $8.00 in steps of 20 cents.
In Experiment 1 the duration of possession and the
duration of ownership were unequal: participants in the Possession
condition had the chocolate bar in their possession for about 15-30
minutes, while those in the Ownership condition only learned that they
owned the item shortly before giving their valuations. This difference
in duration may have exaggerated the effect of possession relative to
that of ownership, pitting "possession for a
significant period of time" against
"ownership for a brief period". In
Experiment 2, duration of possession and duration of ownership were
equal (and short). As participants sat down at individual cubicles for
the experiment, they were given a questionnaire explaining the study
and the condition they were in, and containing the valuation measures.
All participants were shown an example mug, and those in the Possession
condition received the object at this time. After brief verbal
instructions, all participants proceeded to give their valuations. The
elapsed time from receiving experimental instructions to completing the
valuation measures was thus only a minute or two, in both Possession
and Ownership conditions.
Experiment 1 relied on a single dependent measure, the monetary value at
which the participant's choice switched from the object
to a sum of money. In Experiment 2, we added a second measure that
asked participants to provide willingness to accept (WTA) prices (for
those in the Ownership condition) and willingness to pay (WTP) prices
(for those in the No Ownership condition). Participants were asked
"What is the minimum amount of money you are willing
to accept for the coffee mug?" (WTA, Ownership
condition), or "What is the maximum amount of money
you are willing to pay for the coffee mug?" (WTP, No
Ownership condition). We will refer to the first set of values as
"choice values," to the second as
"WTA/WTP."
In contrast to the choice values, which were restricted by the response
sheet to be between $0 and $8, WTA/WTP ratings were made in a free
response format, opening the possibility of extreme values that might
unduly affect the analyses. Inspecting the responses revealed only one
value that was markedly different ($20) from the rest and double the
next highest value ($10 for two respondents). We Winsorized this value
to the next highest ($10) (see Peters, Slovic, & Gregory, 2003 for a
similar approach).
Finally, in Experiment 1 the Possession and No Possession conditions
were conducted separately. This had the advantage of avoiding possible
social comparison effects between those who received the mug and those
who did not. However, this procedure had the disadvantage of not
allowing for random assignment to one of the four experimental cells.
Thus, in Experiment 2, we ran all four cells of the experiment at the
same time, allowing for better random assignment of participants to
experimental conditions. We minimized potential social comparison
effects by seating participants in individual cubicles.
3.1 Method
3.1.1 Participants
Ninety-six business undergraduate students at a Singaporean university
participated as part of a larger experiment session in exchange for
course credit and task payoffs as described in Experiment 1. Only
Singaporean students were allowed to participate as foreign exchange
students might perceive and value the university coffee mug
systematically different.
3.1.2 Stimulus Pretest
As in Experiment 1, we assessed
participants' judgments of whether they had sufficient
information to evaluate the coffee mug (average rating of M =
3.64, SD = 1.84, on a 1-7 scale with
higher values indicating more information). These
ratings showed no significant difference between the two possession
conditions, F(1, 92) = 3.38, ns (p = .07),
prep = .85,
w = .02, or
between the two ownership conditions, F(1, 92) = 1.23,
ns, prep = .67,
w.00.
3.2 Results and discussion
3.2.1 Replication of endowment effect
As in Experiment 1, we first tested for a difference in valuation
between (1) those who owned and possessed the object and (2) those who
neither owned nor possessed it. When comparing these two cells of our
experiment, we found a significant effect on the choice measure,
F(1, 46) = 4.13, p .05,
prep = .88,
w = .06. Those endowed with the
object (i.e., owned and possessed it) gave higher monetary valuations,
M = $3.82 (SD = 2.28), than those not endowed (i.e.,
neither owned nor possessed it), M = $2.70 (SD =
1.44). The same effect materialized with the alternative, WTP/WTA
dependent measure such that those who owned and possessed the object
(M = 4.08, SD = 2.61) gave higher valuations than
those who neither owned nor possessed the it (M = 2.76,
SD = 1.64), F(1, 46) = 4.37, p
.05, prep = .89,
w = .06. Thus, the endowment
effect was again replicated.4
3.2.2 The relative roles of factual ownership and
possession in the endowment effect
Choice values. A 2 (Ownership) x 2 (Possession) ANOVA showed a
significant main effect only for possession, F(1, 91) = 5.13,
p .05, prep = .92,
w = .04 (see Figure 3).
Participants gave the coffee mug a higher monetary
value when they possessed it (M =
$3.84, SD = .2.03) than when they did not possess it
(M = $3.00, SD = 1.50). The effect of actual
ownership was not significant (ownership, M = 3.58,
SD = 1.96, no ownership, M = 3.30, SD =
1.73), F(1, 91) = .60, ns,
prep = .54,
w= .00, and there was no evidence
of a significant interaction, F(1, 91) = .77,
ns, prep = .58,
w= .00. These results replicate
the findings of Experiment 1 that the differences in valuation that
constitute the endowment effect were induced by possession rather than
by factual ownership of the focal object.
Figure 3: Effects of factual ownership and possession on choice
values, Experiment 2.
WTA/WTP. The same analysis on the WTA/WTP measure yielded the
same substantive results: a main effect of possession (possession,
M = 4.01, SD = 2.29, no possession, M =
3.18, SD = 1.66), F(1, 92) = 4.10, p
.05, prep = .88,
w = .03. The effect of actual
ownership was not significant (ownership, M = 3.85,
SD = 2.18, no ownership, M = 3.37, SD =
1.90), F(1, 92) = 1.45, ns,
prep = .70,
w= .01, and there was no evidence
of a significant interaction, F(1, 92) = .69,
ns, prep = .57,
w= .00.
Figure 4: Effects of Factual Ownership and Possession on
WTA/WTP, Experiment 2
3.2.3 The Role of Feelings of Ownership
We next examined again the possible mediating role of subjective
feelings of ownership in linking possession to valuation. A 2
(Ownership) x 2 (Possession) ANOVA revealed a significant effect of
possession on subjective ownership. As predicted, participants who had
the coffee mug in their possession felt stronger ownership (M
= 3.54, SD = 1.79) than those who did not (M =
2.48, SD = 1.48), F(1, 92) = 9.94, p
.01, prep = .98,
w= .09, (see Figure 4). As with
valuations, we found no effect of factual ownership, F(1, 92)
= .63, ns, prep = .55,
w= .00, and no significant
interaction F(1, 92) = .08, ns,
prep = .29,
w= .00.
Stronger feelings of ownership, in turn, led to higher monetary
valuations, B = .46,
SE(B) = .10,
b = .43,
t(93) = 4.59,
p .001, adjusted
R = .18. In order to
test for mediation, we regressed participants' choice
values on both the experimental manipulation of possession and the
presumed mediator (feelings of ownership). Results showed that feelings
of ownership continued to predict monetary valuation,
b = .40, t(92) = 4.01, p
.001, whereas the experimental manipulation did not, b
= .11, t(92) = 1.06, p = .29, ns. A Sobel
test of mediation was significant, z = 2.49, p
.05. Thus, we found that feelings of ownership fully
mediated the effect of possessing the coffee mug on the monetary
valuation of the item.5
Figure 5: Effects of factual ownership and possession on feelings of
ownership, Experiment 2.
4 General Discussion
In two endowment effect
experiments, we independently manipulated factual ownership and
possession of an object (a chocolate bar in Experiment 1 and a
university coffee mug in Experiment 2). This allowed us to disentangle
the effects of these two factors, which are typically confounded -
sellers generally both own and possess the object from the outset,
while buyers or choosers neither own nor possess it. We found a
significant effect of possession, but no significant effect of factual
ownership, on monetary valuation of the objects, both on choice values
(Experiment 1 and 2) and traditional WTA/WTP values (Experiment 2).
These results suggest that while the endowment effect can be
"turned on" in the typical
fashion, it can be "turned off" in
one of two ways. First, it can be turned off by taking the good away
from both sellers and buyers (no possession). Second, it can be given
to both sellers and buyers (possession). These results help to clarify
the antecedents of the endowment effect and suggest an important role
of the subjective sense of ownership in decision making.
The results suggest that the endowment effect may be primarily
driven by subjective feelings of ownership rather than by
factual ownership as such. In other words, it may require the
development of a subjective sense of endowment, rather than a
legal entitlement, for the reference point to shift. Once the
reference point is shifted, loss aversion sets in and leads to
higher valuations. In our experiments, this shift seems to have
been triggered by possession, not factual ownership. Thus, it
appears that participants in the possession condition felt that
not having the object would be a loss, rather than a foregone
gain - counterfactually to their objective state of no
ownership in the possession/no-ownership condition. On the other
side, participants in the no possession condition felt that not
having the object would be a foregone gain, rather than a loss
- again counterfactually to their objective state of ownership
in the no-possession/ownership condition.
This interpretation is consistent with the results of the mediation
analyses. In both experiments, we found the effect of possession on
monetary valuation to be completely mediated by
participants' rated feelings of ownership, which were
enhanced by the physical possession of the object (briefly in
Experiment 2, for a significant period of time in Experiment 1). The
results of these mediation analyses should be interpreted cautiously,
however, due the inherent shortcomings in observational/correlational
approaches such as mediation analyses (Spencer, Zanna, & Fong, 2005)
and because of a potential influence of the monetary valuations
participants provided before indicating their subjective feelings of
ownership.
The present research contributes to a growing literature on the
psychological mechanisms behind the endowment effect (e.g., Carmon &
Ariely, 2000; Novemsky & Kahneman, 2005a,b) and
may help explain several past findings. For example, Strahilevitz and
Loewenstein (1998) found that valuation of an object increased with the
duration of ownership. It is possible that over time,
owners' feelings of ownership increased, thus leading
to higher valuations. Lerner, Small, & Loewenstein (2004) found that
owners' selling prices of an object decreased strongly
when incidental disgust was induced experimentally (through a video
clip). It is possible that the experience of disgust, which is
associated with an "expel" goal
(see Lerner et al.), prevented the development of feelings of ownership
for the object, thus leading to lower monetary valuations as compared
to a control group.
Beyond the endowment effect, the present research also raises the
possibility that the notion of subjective ownership may help explain a
number of phenomena that have been of interest to decision researchers.
For example, future research could examine the role of subjective
ownership in the escalation of commitment to failing projects (Staw,
1976) and failure to disregard sunk costs (Arkes & Blumer, 1985),
which may well involve decision makers' subjective
ownership of a project and a resulting feeling that one must take care
of and maintain it. Similarly, late-bid escalation in English auctions
(Ku, Malhotra, & Murnighan, 2005) may be partly due to strong feelings
of ownership developing among the few remaining bidders. Subjective
ownership might also help explain why windfall gains (Arkes et al.,
1994) and "house money" (Thaler &
Johnson, 1990) are spent lightly, and why pre-choice attachment to more
than one option can lead to post-choice discomfort after having to
choose one of them, which implies
"losing" the other (Carmon,
Wertenbroch, & Zeelenberg, 2003). Thus, a more nuanced
conceptualization of the possible divergence of objective and
subjective ownership may help to explain
a number of important decision making phenomena. As usual, more
research is needed before we can fully appreciate the role of feelings
of ownership in judgment and decision making.
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Footnotes:
1We would like to thank Nidhi Chaudhry, Rashimah
Binte Rajah, Chintan Rastogi, Harsh Saxena, Malavika Shanker, Dionne
Soriano, and Shangbin Xie for help with data collection and entry.
Address: Jochen Reb, Lee Kong Chian School of Business, Singapore Management
University, 50 Stamford Road, Singapore 178899. E-mail:
jreb@smu.edu.sg.
2This method of assessing respondents' valuation
of an object from their responses to a series of hypothetical
choices between the item and differing sums of money has been
used in a number of endowment effect studies (e.g., Kahneman et
al., 1991; Lerner, Small, & Loewenstein, 2004) in which
potential sellers (those initially given the object) were
compared not to potential buyers (those not given the object)
but to "choosers", who were offered choices such as those
described above between the object and different sums of money.
For current purposes, the choice-based method has a number of
advantages over other commonly-used measures such as
Willingness to Pay (WTP) and Willingness to Accept (WTA), which
are prone to extreme responses (since they have no natural
upper bound) and may be distorted if respondents interpret them
as opening bids in a bargaining session rather than as final
lowest or highest prices. Prices realized in actual market
transactions may be influenced by the particular market
mechanism imposed (e.g., open outcry, sealed bid, second price,
etc.) and are, again, only imperfectly related to individual
valuations.
3The selling-price/choice-price ratio
of 1.39 is typical in magnitude (e.g., in Lerner et al., 2004, it was
1.30).
4 The selling-price/choice-price
ratio (1.41) is highly similar to that of Experiment 1 (1.39).
5The same substantive results were
obtained for WTA/WTP as dependent measures. For reasons of brevity, the
analyses are omitted, but can be obtained from the first author.
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