The influence of involvement on the endowment effect: The moveable value function

Abstract The endowment effect is based on the loss aversion built into Prospect Theory's asymmetric value function. This paper posits that the level of consumer involvement with a decision is a moderator of the endowment effect. It is proposed that high involvement increases the slope differential between the loss and gain regions of the value function, enhancing loss aversion. The research further posits that higher involvement is accompanied by higher arousal and cognitive processing which produces stronger negativity in thoughts. The argument for these effects is discussed in the context of evolutionary theory. We conclude that consumers are more loss averse in high versus low involvement conditions.

[1]  Maryanne M. Mowen,et al.  Time and Outcome Valuation: Implications for Marketing Decision Making , 1991 .

[2]  J. Brockner,et al.  Value from hedonic experience and engagement. , 2006, Psychological review.

[3]  S. Alexander Haslam,et al.  The message of social psychology: Perspectives on mind in society. , 1997 .

[4]  Edward B. Royzman,et al.  Negativity Bias, Negativity Dominance, and Contagion , 2001 .

[5]  J. Cacioppo,et al.  Attitudes and Persuasion: Classic and Contemporary Approaches , 1981 .

[6]  Elizabeth Duffy,et al.  Activation and behavior , 1962 .

[7]  Sekar Raju,et al.  The Role of Arousal in Commitment: An Explanation for the Number of Counterarguments , 2006 .

[8]  C. W. Park,et al.  Beyond fit and attitude: The effect of emotional attachment on consumer responses to brand extensions , 2008 .

[9]  T. Brown.  Loss aversion without the endowment effect, and other explanations for the WTA-WTP disparity , 2005 .

[10]  Isaac Marks.  Fears, phobias, and rituals , 1987 .

[11]  Joan Meyers-Levy,et al.  The Influence of Message Framing and Issue Involvement , 1990 .

[12]  J. Cacioppo,et al.  The affect system has parallel and integrative processing components: Form follows function. , 1999 .

[13]  Deborah Roedder John.  Monographs of the journal of consumer research , 2001 .

[14]  R. Dhar,et al.  Consumer Choice between Hedonic and Utilitarian Goods , 2000 .

[15]  All Charity Advertisements Are Not Created Equal: Influences of Message Framing, Vividness Valence, and Number Size Framing , 2008 .

[16]  A. Edland.  Time pressure and the application of decision rules: choices and judgments among multiattribute alternatives. , 1994, Scandinavian journal of psychology.

[17]  Shelley E. Taylor,et al.  Asymmetrical effects of positive and negative events: the mobilization-minimization hypothesis. , 1991, Psychological bulletin.

[18]  Sandra J. Milberg,et al.  The differential processing of price in gains and losses: the effects of frame and need for cognition , 2000 .

[19]  Blair T. Johnson,et al.  Experimental Induction of Biased Systematic Processing: The Directed-Thought Technique , 1998 .

[20]  Deborah A. Small,et al.  Heart Strings and Purse Strings , 2004, Psychological science.

[21]  Craig A. Smith,et al.  Patterns of cognitive appraisal in emotion. , 1985, Journal of personality and social psychology.

[22]  J. J. Seta,et al.  Does It Matter If It Involves My Group? How the Importance of Collective-Esteem Influences a Group-Based Framing Task , 2006 .

[23]  Colin Camerer.  Three Cheers—Psychological, Theoretical, Empirical—for Loss Aversion , 2005 .

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

[25]  P. Slovic.  Differential effects of real versus hypothetical payoffs on choices among gambles. , 1969 .

[26]  P. Aggarwal,et al.  The Moderating Effect of Relationship Norm Salience on Consumers' Loss Aversion , 2006 .

[27]  S. Chaiken.  Heuristic versus systematic information processing and the use of source versus message cues in persuasion. , 1980 .

[28]  A. Tversky,et al.  Prospect Theory : An Analysis of Decision under Risk Author ( s ) : , 2007 .

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

[30]  J. List.  Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace , 2004 .

[31]  A. Tversky,et al.  Loss Aversion in Riskless Choice: A Reference-Dependent Model , 1991 .

[32]  Ying Zhang,et al.  The Role of Anticipated Emotions in the Endowment Effect , 2005 .

[33]  J. Brehm.  A theory of psychological reactance. , 1981 .

[34]  T. Silverstone.  Appetite and food intake. , 1976 .

[35]  O. John,et al.  Automatic vigilance: the attention-grabbing power of negative social information. , 1991, Journal of personality and social psychology.

[36]  D. Kahneman,et al.  The Boundaries of Loss Aversion , 2005 .

[37]  Peter Wright.  The harassed decision maker: Time pressures, distractions, and the use of evidence. , 1974 .

[38]  Richard P. Larrick,et al.  Goals as Reference Points , 1999, Cognitive Psychology.

[39]  D. A. Kenny,et al.  The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. , 1986, Journal of personality and social psychology.

[40]  Robin Gregory,et al.  The role of affect in the WTA/WTP disparity , 2003 .

[41]  D. Buss,et al.  Evolutionary Psychology: A New Paradigm for Psychological Science , 1995 .

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

[43]  E. E. Jones.  Attribution: Perceiving the Causes of Behavior , 1987 .

[44]  Abigail A. Scholer,et al.  Engaging the Consumer: The Science and Art of the Value Creation Process , 2009 .

[45]  R. Trivers.  Parental investment and sexual selection , 1972 .

[46]  Susan T. Fiske,et al.  Attention and weight in person perception: The impact of negative and extreme behavior. , 1980 .

[47]  Himanshu Mishra,et al.  The Endowment Effect: Rose-Tinted and Dark-Tinted Glasses , 2005 .

[48]  Ayelet Fishbach.  The function of value in self-regulation , 2009 .

[49]  Christopher K. Hsee,et al.  Risk as Feelings , 2001, Psychological bulletin.

[50]  S. West,et al.  A comparison of methods to test mediation and other intervening variable effects. , 2002, Psychological methods.

[51]  J. Cacioppo,et al.  Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement , 1983 .

[52]  M. Degroot,et al.  Measuring utility by a single-response sequential method. , 1964, Behavioral science.

[53]  Catherine A. Cole,et al.  Consumer decision making and aging: Current knowledge and future directions , 2009 .

[54]  R. Thayer.  The biopsychology of mood and arousal , 1989 .

[55]  Stephen A. Rains,et al.  Psychological Reactance and Persuasive Health Communication: A Test and Extension of the Intertwined Model , 2007 .

[56]  Rebecca R Boyce.  An Experimental Examination of Intrinsic Values as a , 1992 .

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