The Effect of Giving It All Up on Valuation: A New Look at the Endowment Effect

Amos Schurr () and Ilana Ritov ()
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Amos Schurr: Department of Management, Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, Beer-Sheva 84105, Israel
Ilana Ritov: School of Education and Center for the Study of Rationality, The Hebrew University of Jerusalem, Jerusalem 91904, Israel

Management Science, 2014, vol. 60, issue 3, 628-637

Abstract: In three experiments we show that the endowment effect---the tendency to demand more money for relinquishing owned goods than one is willing to pay for the same goods---fails to emerge when sellers are not fully depleted of their endowment. This finding is incompatible with prospect theory's account of the effect as stemming primarily from aversion to loss relative to the individual's current state. We suggest a new account of the endowment effect as reflecting the human aversion to “giving it all up” rather than simply an aversion to incurring any loss relative to the status quo. Experiments 1 and 2 show the effect employing a pricing paradigm. Experiment 3 examines what constitutes “all” in the giving-it-all-up effect. This paper was accepted by Uri Gneezy, behavioral economics.

Keywords: endowment effect; loss aversion; reference dependence; end state (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:60:y:2014:i:3:p:628-637

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