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The Day the Endowment Effect Went Missing

Wrisberg, Anton LU (2019) KOGM20 20191
Cognitive Science
Abstract
The endowment effect, that people tend to value goods higher if owning them than if not, conflicts central economic principles. A new theory explains this price disparity by uncertain sellers’ and buyers’ strategic reliance on opposite borders of a spectrum of possible utilities of a good. Through a review of concurrent theories, this paper highlights the superiority of the new uncertain utilities theory compared to the loss aversion, bad deal aversion, psychological ownership, and attribution sampling bias explanations of the endowment effect. Despite this, five pilot studies testing the uncertain utilities theory employing the increasing information paradigm fail not only at supporting the theory’s hypotheses but also at finding proper... (More)
The endowment effect, that people tend to value goods higher if owning them than if not, conflicts central economic principles. A new theory explains this price disparity by uncertain sellers’ and buyers’ strategic reliance on opposite borders of a spectrum of possible utilities of a good. Through a review of concurrent theories, this paper highlights the superiority of the new uncertain utilities theory compared to the loss aversion, bad deal aversion, psychological ownership, and attribution sampling bias explanations of the endowment effect. Despite this, five pilot studies testing the uncertain utilities theory employing the increasing information paradigm fail not only at supporting the theory’s hypotheses but also at finding proper endowment effects altogether. Two successful replications of earlier endowment effect studies using the valuation and exchange paradigms hint to the final theory of the endowment effect: experimental artefacts. The seven studies include nine different goods (mugs, t-shirts, falafel wraps, art prints, chocolate bars, diseases/cures, movie tickets, bananas, and apples) and 422 unique participants. The results suggests that the endowment effect may to some extent be an experimental artefact. The discussion highlights the importance of context to endowment effect study participants and argues for endowment effect theories acknowledging humans as information seeking and processing individuals. (Less)
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author
Wrisberg, Anton LU
supervisor
organization
alternative title
Dagen då ägande-effekten försvann
course
KOGM20 20191
year
type
H2 - Master's Degree (Two Years)
subject
keywords
endowment effect, cognition, seller buyer disparity, price, information, increased information paradigm, uncertain utilities
language
English
id
8995275
date added to LUP
2019-10-23 09:14:47
date last changed
2019-10-23 09:14:47
@misc{8995275,
  abstract     = {The endowment effect, that people tend to value goods higher if owning them than if not, conflicts central economic principles. A new theory explains this price disparity by uncertain sellers’ and buyers’ strategic reliance on opposite borders of a spectrum of possible utilities of a good. Through a review of concurrent theories, this paper highlights the superiority of the new uncertain utilities theory compared to the loss aversion, bad deal aversion, psychological ownership, and attribution sampling bias explanations of the endowment effect. Despite this, five pilot studies testing the uncertain utilities theory employing the increasing information paradigm fail not only at supporting the theory’s hypotheses but also at finding proper endowment effects altogether. Two successful replications of earlier endowment effect studies using the valuation and exchange paradigms hint to the final theory of the endowment effect: experimental artefacts. The seven studies include nine different goods (mugs, t-shirts, falafel wraps, art prints, chocolate bars, diseases/cures, movie tickets, bananas, and apples) and 422 unique participants. The results suggests that the endowment effect may to some extent be an experimental artefact. The discussion highlights the importance of context to endowment effect study participants and argues for endowment effect theories acknowledging humans as information seeking and processing individuals.},
  author       = {Wrisberg, Anton},
  keyword      = {endowment effect,cognition,seller buyer disparity,price,information,increased information paradigm,uncertain utilities},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Day the Endowment Effect Went Missing},
  year         = {2019},
}