This is a summary of the Perusall articles for the course Consumer and Economic Psychology. Out of all the articles I summarized what I thought were the important parts of the articles.
The articles that are included are:
Morewedge & Giblin (2015)
Greifeneder, Bless & Fiedler (2017)
Bouma...
,Morewedge & Giblin (2015)
Explanations of the endowment effect: an integrative review
The endowment effect is the tendency for people wo own a good to value it more
than people who do not. Loss aversion has traditionally been used to explain this
effect but does not specify its underlying cognitive and neural processes.
Loss aversion
The endowment effect is traditionally attributed to two features of prospect
theory. Reference-dependence makes buyers frame good as gains relative to the
status quo, and sellers frame goods as losses relative to the status quo.
Because people are loss averse (psychological impact of a loss is greater than
equivalent gain), goods have greater perceived value when selling them than
when buying them. This theory suggests the endowment effect is driven by
sellers’ higher valuation of goods rather than buyers’ higher valuation of money.
Evolutionary advantage
Evolutionary accounts propose that a predisposition to overvalue goods evolved
because it conferred an advantage in bargaining. People who overvalued what
they owned acquired more offspring than could people who accurately valued
what they owned.
But, it seems unlikely that the endowment effect is a specific evolutionary
adaptation.
Strategic misrepresentation
If participants believe they are in a negotiation, they may strategically
misrepresent their valuation of the good. But considerable evidence suggests
that strategic misrepresentations alone does not explain WTP-WTA gaps.
Reference prices
Reference prices are comparison standards drawn from the external
environment or retrieved from memory. One good can have multiple reference
prices. Reference price theory proposes that when the true value of a good to a
person compares unfavorably to salient reference prices, buyers will reduce their
stated WTP and sellers will inflate their stated WTA to avoid transaction disutility.
Biased information processing
Buying, choosing and selling evoke cognitive frames or queries. These frames
bias the search for, attention to, and recollection of information, which influences
valuation.
Frames evoked by buying and choosing increase the accessibility of
information that suggests keeping or taking the money is preferable to
acquiring the good.
Frames evoked by selling increase the accessibility of information that
suggests keeping the good is preferable to exchanging it for money.
Prompting buyers to consider positive features of goods increases their WTP and
prompting sellers to consider negative features of good and reasons to take the
money reduces their WTA.
Psychological ownership
, Ownership status buyers are never owners and sellers always own the good.
This is problematic as ownership alone is sufficient to increase the perceived
value of a good. Mere ownership effects are driven by psychological rather than
factual ownership.
Merely touching a good or imagining one owns a good engenders a more positive
evaluation if that experience creates a feeling of psychological ownership.
Psychological ownership increases with the amount of time one possesses a
good.
Two explanations for the mere ownership effect:
- Ownership creates new associations with the good
- It improves memory for the good through a self-referential memory effect.
The good is incorporated into the self-concept of the owner. Most self-evaluations
are positive, and this new association is therefore usually positive. Self-
associations may take the form of an emotional attachment to the good. Once an
attachment is formed, the potential loss of the good is perceived as a threat to
the self.
Another route by which ownership may increase value is through a self-
referential memory effect. People have better memory for goods that they own
than goods that are owned by others, even if that ownership is imagined. People
spontaneously recall more positive features of goods that they own relative to
those they do not.
Ownership may increase the valuation of a good by both adding non-
transferrable positive attributes to the good and by making attributes of the good
more accessible than are other attributes of the transaction.
Attribute sampling bias
Proposed in as integrative attribute sampling bias theory that explains how all
three forms of the endowment effect might arise from biases in the accessibility
of value relevant attributes.
When attributes suggesting that one should buy or keep the good are
more accessible, the good should increase in value.
When attributes suggesting one should sell or not acquire the good are
more accessible, the good should decrease in value.
Attribute sampling bias explains findings and makes novel predictions that loss
aversion does not. Predictions:
1. Attribute sampling bias predicts that because attributes of the good are
most accessible to owners and owner-sellers, the magnitude of the
endowment effect should increase as the positive attributes of a good
increase in extremity or valence. As the negative attributes of a bad
increase in extremity or valence, there should be a greater reversal of the
endowment effect.
2. The magnitude of the endowment effect should vary with the range of
attribute values associated with the good.
3. Self-referential memory effects create an endogenous framing effect by
increasing the accessibility of attributes of owned goods.
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