The “endowment effect” – where someone who owns a good will value it more than someone who does not – has generally been put down to loss aversion, but new research suggests that there may be other explanations at play.
In the latest in their series of articles on the new frontiers of behavioural science, Crawford Hollingworth and Liz Barker of The Behavioural Architects explore alternative psychological mechanisms that may explain the endowment effect and consider what factors seem to strengthen or weaken the effect.
For example, ownership of an item may cause someone to rate it more positively and see lots of good things about it as opposed to those who don’t own it. Even merely touching the item or touching an image of the item or imagining owning it can generate a more positive evaluation if such actions create feelings of psychological ownership.
Recent research from Adam Brasel and James Gips found that using a touchscreen to choose a product or service increased both people’s sense of psychological ownership and willingness to pay, particularly more haptic products.
The effect also strengthened when the touchscreen device – an iPad – was owned by the participant as opposed to the university laboratory. Brasel and Gips believe that if people owned the device it contributed to feelings of endowment and ownership of the product they were browsing and exploring.
Another potential driver behind the endowment effect is a type of cognitive framing effect, Hollingworth and Barker say. This is where owners and buyers consider different information about the item when evaluating a good.
More specifically, positive and negative qualities of the item may be more or less salient to someone, depending on whether they are potentially buying or selling it, or own or don’t own it.
“If we already own an item, we are likely to notice and more easily identify or bring to mind positive attributes of the item,” the authors note. “However, if we don’t own the item, it may be easier to spot and bring to mind negative features.
“This effect may in turn both strengthen feelings of ownership and make us more reluctant to sell. For example, if we can easily bring to mind attributes that suggest we should keep hold of the item or buy the item, it should increase in value - and vice versa.”
Sourced from WARC