The Role of Anticipated Emotions in the Endowment Effect

This research explored the role of anticipated negative feelings in the observed disparity between buying and selling prices for the same endowed object. We assumed that anticipated negative reactions to losses deter people from trading an endowed object and therefore psychological variables that attenuate the emotional response to negative events should further reduce the price disparity between buyers and sellers. In 3 studies, we tested whether factors that either decrease concern about negative feelings (e.g., positive mood, framing of the transaction as involving no action) or increase the anticipated negative reaction to failure to act (e.g., priming errors of omission) further eliminate the disparity between buying and selling prices. These studies provide a novel conceptualization of the endowment bias and, more generally, illustrate the role of anticipated negative feelings in decision making.

[1]  William Samuelson,et al.  Status quo bias in decision making , 1988 .

[2]  A. Isen,et al.  The influence of positive affect on acceptable level of risk: The person with a large canoe has a large worry , 1987 .

[3]  Gordon H. Bower,et al.  Mood effects on subjective probability assessment , 1992 .

[4]  A. Kruglanski,et al.  Emotional transfer in goal systems , 2004 .

[5]  A. Isen,et al.  The Influence of Positive Affect and Visual Access on the Discovery of Integrative Solutions in Bilateral Negotiation , 1986 .

[6]  D. Kahneman,et al.  Heuristics and Biases: The Psychology of Intuitive Judgment , 2002 .

[7]  J. A. Sinden,et al.  The Persistence of Evaluation Disparities , 1987 .

[8]  Bruce G. S. Hardie,et al.  Modeling Loss Aversion and Reference Dependence Effects on Brand Choice , 1993 .

[9]  Shelley E. Taylor,et al.  A stitch in time: self-regulation and proactive coping. , 1997, Psychological bulletin.

[10]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[11]  G. Clore,et al.  Mood as Information: 20 Years Later , 2003 .

[12]  N Liberman,et al.  Promotion and prevention choices between stability and change. , 1999, Journal of personality and social psychology.

[13]  R. Sugden,et al.  Regret Theory: An alternative theory of rational choice under uncertainty Review of Economic Studies , 1982 .

[14]  E. Dijk,et al.  Buying and selling exchange goods: Loss aversion and the endowment effect , 1996 .

[15]  Ran R. Hassin,et al.  The New Unconscious , 2006 .

[16]  E. Higgins,et al.  Beyond pleasure and pain. , 1997, The American psychologist.

[17]  R. Thaler.  Toward a positive theory of consumer choice , 1980 .

[18]  G. Clore,et al.  Feelings and phenomenal experiences , 1996 .

[19]  M. F. Luce,et al.  Choosing to Avoid: Coping with Negatively Emotion-Laden Consumer Decisions , 1998 .

[20]  Colin Camerer,et al.  The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework , 1999 .

[21]  J. Baron,et al.  Status-quo and omission biases , 1992 .

[22]  J. Baron,et al.  Omission and commission in judgment and choice , 1991 .

[23]  G. Bodenhausen,et al.  Happiness and stereotypic thinking in social judgment. , 1994 .

[24]  Y. Trope,et al.  Walking the tightrope between feeling good and being accurate: mood as a resource in processing persuasive messages. , 2002, Journal of personality and social psychology.

[25]  D. Ariely,et al.  Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers , 2000 .

[26]  A. Isen,et al.  Affect, accessibility of material in memory, and behavior: a cognitive loop? , 1978, Journal of personality and social psychology.

[27]  Y. Trope,et al.  Going Beyond the Motivation Given: Self-Control and Situational Control Over Behavior , 2005 .

[28]  Michael A. Becker.  Social Psychology: Handbook of Basic Principles , 1998 .

[29]  G. Clore,et al.  Mood, misattribution, and judgments of well-being: Informative and directive functions of affective states. , 1983 .

[30]  J. Knetsch,et al.  Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value , 1984 .

[31]  J. Baron,et al.  Outcome Knowledge, Regret, and Omission Bias , 1995 .

[32]  I. Simonson,et al.  THE INFLUENCE OF ANTICIPATING REGRET AND RESPONSIBILITY ON PURCHASE DECISIONS , 1992 .

[33]  Robert Sugden,et al.  Disappointment and Dynamic Consistency in Choice under Uncertainty , 1986 .

[34]  D. Kahneman,et al.  Experimental Tests of the Endowment Effect and the Coase Theorem , 1990, Journal of Political Economy.

[35]  R. Wyer,et al.  Cultural, social, and emotional determinants of decisions under uncertainty , 2003 .

[36]  I. Ritov,et al.  Emotion-based choice , 1999 .

[37]  E. Tory Higgins,et al.  How Self-Regulation Creates Distinct Values: The Case of Promotion and Prevention Decision Making , 2002 .

[38]  M. Bar-Hillel,et al.  Why are people reluctant to exchange lottery tickets , 1996 .

[39]  R. Pieters,et al.  The inaction effect in the psychology of regret. , 2002, Journal of personality and social psychology.

[40]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .

[41]  Dale T. Miller,et al.  Norm theory: Comparing reality to its alternatives , 1986 .

[42]  M. Zeelenberg,et al.  Regret in Repeat Purchase versus Switching Decisions: The Attenuating Role of Decision Justifiability , 2002 .

[43]  T. Gilovich,et al.  The experience of regret: what, when, and why. , 1995, Psychological review.

[44]  David E. Bell,et al.  Regret in Decision Making under Uncertainty , 1982, Oper. Res..

[45]  N. Roese,et al.  Counterfactual Thinking: The Intersection of Affect and Function , 1997 .

[46]  Dale T. Miller,et al.  Counterfactual Thought, Regret, and Superstition: How to Avoid Kicking Yourself , 1995 .

[47]  N. Roese,et al.  What Might Have Been: The Social Psychology of Counterfactual Thinking , 1995 .

[48]  G. Wells,et al.  Mental Simulation of Causality , 1989 .

[49]  E. Wertheim,et al.  Depression, guilt, and self-management of pleasant and unpleasant events. , 1983, Journal of personality and social psychology.

[50]  B. Mellers.  Choice and the relative pleasure of consequences. , 2000, Psychological bulletin.

[51]  C. Anderson.  The Psychology of Doing Nothing: Forms of Decision Avoidance Result from Reason and Emotion , 2003, Psychological bulletin.