An investigation of the endowment effect using a factorial design
The endowment effect is interpreted as evidence that we may ‘over value’ objects we already own. In this study we introduce a novel approach to investigating the endowment effect, the factorial survey design, which enables manipulation of variables potentially influencing the endowment effect. We consider the value and uniqueness of the possession, whether it is a gift from a close friend and whether the trade is with a stranger. We find a higher endowment effect for possessions received as gifts from a close friend and this effect is entirely due to responses from women. Furthermore, we find significantly higher endowment effects for valuable possessions. Our results suggest there is ample scope for broadening the range of methods applied to this area of economic research.
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2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
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- Chris Starmer & Elke Renner & Henrik Orzen & Simon Gachter, 2007. "Are experimental economists prone to framing effects? A natural field experiment," Natural Field Experiments 00331, The Field Experiments Website.
- Simon Gaechter & Henrik Orzen & Elke Renner & Chris Starmer, 2007. "Are Experimental Economists Prone to Framing Effects? A Natural Field Experiment," Discussion Papers 2007-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- 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.
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