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An investigation of the endowment effect using a factorial design

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  • Jefferson, Therese
  • Taplin, Ross

Abstract

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.

Suggested Citation

  • Jefferson, Therese & Taplin, Ross, 2011. "An investigation of the endowment effect using a factorial design," Journal of Economic Psychology, Elsevier, vol. 32(6), pages 899-907.
  • Handle: RePEc:eee:joepsy:v:32:y:2011:i:6:p:899-907
    DOI: 10.1016/j.joep.2011.08.004
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    References listed on IDEAS

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    1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
    2. 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.
    3. Gächter, Simon & Orzen, Henrik & Renner, Elke & Starmer, Chris, 2009. "Are experimental economists prone to framing effects? A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 443-446, June.
    4. Strahilevitz, Michal A & Loewenstein, George, 1998. " The Effect of Ownership History on the Valuation of Objects," Journal of Consumer Research, Oxford University Press, vol. 25(3), pages 276-289, December.
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    Citations

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    Cited by:

    1. Jefferson, Therese & Taplin, Ross, 2012. "Relational aspects of decisions to sell," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(5), pages 697-704.
    2. Alexopoulos, Theodore & Šimleša, Milija & Francis, Mélanie, 2015. "Good self, bad self: Initial success and failure moderate the endowment effect," Journal of Economic Psychology, Elsevier, vol. 50(C), pages 32-40.
    3. repec:bla:germec:v:18:y:2017:i:1:p:118-131 is not listed on IDEAS
    4. repec:ksa:szemle:1764 is not listed on IDEAS

    More about this item

    Keywords

    Gender effects; Endowment effect; Scenario experiment; Willingness to pay; Willingness to accept; Relational framing;

    JEL classification:

    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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