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

  • Nathaniel J. S. Ashby
  • Stephan Dickert
  • Andreas Glockner
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    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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    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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    1. 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.
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    6. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
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    10. 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.
    11. 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.
    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. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
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