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The Endowment Effect: Rose-Tinted and Dark-Tinted Glasses

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  • Dhananjay Nayakankuppam
  • Himanshu Mishra

Abstract

The endowment effect, predicted by prospect theory, is a robust finding in behavioral decision theory. Extending recent examinations of the underlying processes, we present evidence for differential perceptions of the traded item, with sellers focusing more on positive features and less on negative features, relative to buyers. In experiment 1, sellers and buyers access information of differing valence in a free recall task. Experiment 2 utilizes error rates and response latencies to demonstrate systematic, and differing, patterns of errors and biases in reactions to valenced stimuli. Experiment 3 utilizes contrast effects to manipulate these foci, thereby moderating the endowment effect. (c) 2005 by JOURNAL OF CONSUMER RESEARCH, Inc..

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Consumer Research.

Volume (Year): 32 (2005)
Issue (Month): 3 (December)
Pages: 390-395

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Handle: RePEc:ucp:jconrs:v:32:y:2005:i:3:p:390-395

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Web page: http://www.journals.uchicago.edu/JCR/

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Cited by:
  1. Doron Sonsino, 2011. "A note on negativity bias and framing response asymmetry," Theory and Decision, Springer, vol. 71(2), pages 235-250, August.
  2. Crusius, Jan & van Horen, Femke & Mussweiler, Thomas, 2012. "Why process matters: A social cognition perspective on economic behavior," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 677-685.
  3. Kwon, Kyoung-Nan & Lee, Jinkook, 2009. "The effects of reference point, knowledge, and risk propensity on the evaluation of financial products," Journal of Business Research, Elsevier, vol. 62(7), pages 719-725, July.
  4. Nathaniel J. S. Ashby & Stephan Dickert & Andreas Glockner, 2012. "Focusing on what you own: Biased information uptake due to ownership," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(3), pages 254-267, May.

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