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Endowment Effect in negotiations: group versus individual decision-making

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  • Amira Galin

Abstract

The study’s two aims are: (a) to investigate whether groups, as compared to individuals, show a different degree of Endowment Effect (EE) during the negotiating of intangible assets, such as leisure time and (b) to gain some insight into the underlying mechanism behind groups’ decision-making processes. A total of 138 graduate students were randomly assigned to 35 groups of 3 members each; and 33 were randomly labeled as “individuals.” The study simulated two scenarios in which the students, both individuals and groups, had to decide what their demands from the university authorities were—once as “sellers” and another time as “buyers” in regard to their own leisure time. The findings indicate the presence of an Endowment Effect (EE) in both individuals and groups. However, groups significantly amplified the Endowment Effect in comparison to individuals. The mechanism which best explains why groups tend to amplify negotiating decisions was found to be the “Majority Rule,” but the “leader” also influences such amplification. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Amira Galin, 2013. "Endowment Effect in negotiations: group versus individual decision-making," Theory and Decision, Springer, vol. 75(3), pages 389-401, September.
    • Handle: RePEc:kap:theord:v:75:y:2013:i:3:p:389-401
    DOI: 10.1007/s11238-012-9350-3
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