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Focusing on what you own: Biased information uptake due to ownership

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  • Nathaniel J. S. Ashby
  • Stephan Dickert
  • Andreas Glockner
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    Abstract

    The endowment effect has been debated for over 30 years. Recent research suggests that differential focus of attention might play a role in shaping preferences. In two studies we investigated the role of biased attention in the emergence of endowment effects. We thereby derive predictions from an extended version of evidence accumulation models by additionally assuming a bias in attentional allocation based on one's endowment status. We test these predictions against an alternative account in which the endowment effect is the result of initial anchoring and adjustment differences (Sequential Value Matching model; Johnson & Busemeyer, 2005). In both studies we add deliberation time constraints to a standard Willingness-to-Accept/Willingness-to-Pay paradigm and consistently find that the endowment effect grows as deliberation time increases. In Study 2 we additionally use eye tracking and find that buyers focus more on value decreasing attributes than sellers (and vice versa for value increasing attributes). This shift in attention plays a pivotal role in the construction of value and partially mediates the endowment effect.

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    Bibliographic Info

    Article provided by Society for Judgment and Decision Making in its journal Judgment and Decision Making.

    Volume (Year): 7 (2012)
    Issue (Month): 3 (May)
    Pages: 254-267

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    Handle: RePEc:jdm:journl:v:7:y:2012:i:3:p:254-267

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    Related research

    Keywords: endowment effect; attention; evidence accumulation models; eye tracking.;

    References

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    1. Michael Schulte-Mecklenbeck & Anton Kuhberger & Rob Ranyard, 2011. "The role of process data in the development and testing of process models of judgment and decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 6(8), pages 733-739, December.
    2. van Dijk, Eric & van Knippenberg, Daan, 1998. "Trading wine: On the endowment effect, loss aversion, and the comparability of consumer goods," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 485-495, August.
    3. Ana M. Franco-Watkins & Joseph G. Johnson, 2011. "Applying the decision moving window to risky choice: Comparison of eye-tracking and mousetracing methods," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 6(8), pages 740-749, December.
    4. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
    6. Stephan Dickert & Paul Slovic, 2009. "Attentional mechanisms in the generation of sympathy," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(4), pages 297-306, June.
    7. Charles R. Plott & Kathryn Zeiler, 2007. "Exchange Asymmetries Incorrectly Interpreted as Evidence of Endowment Effect Theory and Prospect Theory?," American Economic Review, American Economic Association, vol. 97(4), pages 1449-1466, September.
    8. Knetsch, Jack L & Sinden, J A, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 507-21, August.
    9. Brown, Thomas C., 2005. "Loss aversion without the endowment effect, and other explanations for the WTA-WTP disparity," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 367-379, July.
    10. K. Carrie Armel & Antonio Rangel, 2008. "The Impact of Computation Time and Experience on Decision Values," American Economic Review, American Economic Association, vol. 98(2), pages 163-68, May.
    11. Strahilevitz, Michal A & Loewenstein, George, 1998. " The Effect of Ownership History on the Valuation of Objects," Journal of Consumer Research, University of Chicago Press, vol. 25(3), pages 276-89, December.
    12. Alessandro Innocenti & Alessandra Rufa & Jacopo Semmoloni, 2009. "Overconfident Behavior In Informational Cascades: An Eye-Tracking Study," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 1109, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    13. Carmon, Ziv & Ariely, Dan, 2000. " Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers," Journal of Consumer Research, University of Chicago Press, vol. 27(3), pages 360-70, December.
    14. K. Carrie Armel & Aurelie Beaumel & Antonio Rangel, 2008. "Biasing simple choices by manipulating relative visual attention," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 3, pages 396-403, June.
    15. Dhananjay Nayakankuppam & Himanshu Mishra, 2005. "The Endowment Effect: Rose-Tinted and Dark-Tinted Glasses," Journal of Consumer Research, University of Chicago Press, vol. 32(3), pages 390-395, December.
    16. Eisenberger, Roselies & Weber, Martin, 1995. "Willingness-to-Pay and Willingness-to-Accept for Risky and Ambiguous Lotteries," Journal of Risk and Uncertainty, Springer, vol. 10(3), pages 223-33, May.
    17. Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
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    Cited by:
    1. Enrico Rubaltelli & Stephan Dickert & Paul Slovic, 2012. "Response mode, compatibility, and dual-processes in the evaluation of simple gambles: An eye-tracking investigation," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(4), pages 427-440, July.
    2. Lunn, Pete & Lunn, Mary, 2014. "A Computational Theory of Willingness to Exchange," Papers WP477, Economic and Social Research Institute (ESRI).

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