ReportBad riddance or good rubbish? Ownership and not loss aversion causes the endowment effect
Section snippets
Experiment 1: when buyers are owners
In Experiment 1, we studied sellers who owned a coffee mug (owner–sellers) and buyers who did not own a coffee mug (nonowner-buyers), as has been done in previous studies of the endowment effect. But we also studied buyers who already owned the same coffee mug (owner–buyers) (see Corrigan & Rousu, 2006). We reasoned that if loss aversion drives the endowment effect, then sellers should value the mug more than buyers do regardless of whether those buyers do or do not already own a mug. On the
Experiment 2: when sellers are not owners
The ownership account predicts that the endowment effect should disappear when buyers become owners, and this is what happened in Experiment 1. The ownership account also predicts that the endowment effect should disappear when sellers become nonowners, and that prediction was investigated in Experiment 2.
Although the idea of selling without owning may seem odd at first, it happens all the time. Buyers’ brokers and sellers’ brokers are people who trade goods they do not own. In Experiment 2, we
General discussion
The loss aversion account of the endowment effect states that the effect is due solely to the fact that sellers see transactions as powerfully aversive losses whereas buyers see them as mildly attractive gains. It explicitly denies the possibility that the effect occurs because people find the goods they own to be especially appealing. This denial is based on the fact that in previous studies when people were asked to trade a good, sellers demanded more than buyers were willing to pay, but when
Acknowledgments
We gratefully acknowledge the support of research grant # BCS-0722132 from the National Science Foundation to Daniel T. Gilbert and Timothy D. Wilson. We thank Max Bazerman, David Laibson, Sendhil Mullainathan, and Dick Thaler for helpful comments and advice.
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