Neural Antecedents of the Endowment Effect

Knutson, Brian; Wimmer, G. Elliott; Rick, Scott; Hollon, Nick G.; Prelec, Dražen; Loewenstein, George

doi:10.1016/j.neuron.2008.05.018

Cited by 147 publications

(105 citation statements)

References 43 publications

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“…While control participants exhibited typical levels of loss aversion, neither of the two amygdaladamaged participants exhibited loss aversion. Also consistent with the notion of self-threat, Knutson et al (2008) found that while participants considered selling, there was a positive correlation between activation in the right insula and estimates of the endowment effect. The insula activation has been observed in participants in other distressing contexts such as unfair ultimatum game offers (Sanfey et al 2003) or social exclusion (Eisenberger, Lieberman, and Williams 2003).…”

Section: Selling As Self-threatsupporting

confidence: 74%

“…As we noted previously, self-reports do not capture loss aversion (Brown 2005), but there is distinct neural activity for loss and gain domains in both risky as well as riskless choice (Knutson et al 2008;Tom et al 2007). Findings from this research, based on the notion of implicit threat and automatic defense response, offer a plausible mechanism for loss aversion: the endowment effect may be a manifestation of self-enhancement due to selfthreat from a forthcoming loss of a self-associated object.…”

Section: Discussionmentioning

confidence: 59%

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The Endowment Effect as Self-Enhancement in Response to Threat

Chatterjee

Irmak²,

Rose

2013

J Consum Res

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Section: Selling As Self-threatsupporting

confidence: 74%

Section: Discussionmentioning

confidence: 59%

The Endowment Effect as Self-Enhancement in Response to Threat

Chatterjee

Irmak²,

Rose

2013

J Consum Res

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“…This finding is important insofar as it weighs against a number of potential normative accounts of our data that have been offered to explain related phenomena (33,(54)(55)(56). Rather, to the extent participants were anxious because of a perceived loss, it would be explained only by a reaction to the total loss (i.e., the sum of the unchosen values), a possibility that could plausibly obtain if participants felt "endowed" with the options presented to them on each trial (57,58). Because the predictions of this particular foregone value account are indistinguishable from those of a conflict-based account for any choice between similarly valued items, further experimental data and theoretical models (quantifying the conflict experienced as items vary in overall and relative values) are needed to better adjudicate between these two possibilities.…”

Section: Discussionmentioning

confidence: 83%

Neural correlates of dueling affective reactions to win–win choices

Shenhav

Buckner

2014

Proc. Natl. Acad. Sci. U.S.A.

118

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Win-win choices cause anxiety, often more so than decisions lacking the opportunity for a highly desired outcome. These anxious feelings can paradoxically co-occur with positive feelings, raising important implications for individual decision styles and general well-being. Across three studies, people chose between products that varied in personal value. Participants reported feeling most positive and most anxious when choosing between similarly highvalued products. Behavioral and neural results suggested that this paradoxical experience resulted from parallel evaluations of the expected outcome (inducing positive affect) versus the cost of choosing a response (inducing anxiety). Positive feelings were reduced when there was no high-value option, and anxiety was reduced when only one option was highly valued. Dissociable regions within the striatum and the medial prefrontal cortex (mPFC) tracked these dueling affective reactions during choice. Ventral regions, associated with stimulus valuation, tracked positive feelings and the value of the best item. Dorsal regions, associated with response valuation, tracked anxiety. In addition to tracking anxiety, the dorsal mPFC was associated with conflict during the current choice, and activity levels across individual items predicted whether that choice would later be reversed during an unexpected reevaluation phase. By revealing how win-win decisions elicit responses in dissociable brain systems, these results help resolve the paradox of win-win choices. They also provide insight into behaviors that are associated with these two forms of affect, such as why we are pulled toward good options but may still decide to delay or avoid choosing among them.I n a famous thought experiment, a hungry donkey is placed exactly between two equal bales of hay and, unable to decide which to approach, starves. Human decision makers face problems similar to the metaphorical donkey. Whether deciding between schools to attend or desserts to order, choices involving equally good outcomes ("win-win" choices) can generate anxiety along with the positive feelings one has about the rewarding prospects (1). Although the positive feelings may lead individuals to prefer having more good options, the anxiety can lead them to delay choosing, choose suboptimally, or make no choice at all (2-5). These seemingly contradictory preferences, particularly in situations where a "wrong" choice has negligible costs, represent a paradox for many decision scientists (6). The potential impact of negative choice experiences on important medical and financial decisions (7, 8) and on general well-being (6, 9, 10) gives the paradox far-reaching consequences. However, despite substantial research on the impact of choice conflict on behavior (2,5,7,8) and postchoice feelings (1, 9, 11), little is known about the basis of the dueling affective reactions to the choice itself.One possibility is that positive and anxious feelings to win-win choices are tied to separate components of the neural circuitry for decision maki...

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“…Toward this goal, as in a previous neuroimaging study (8), we focused on the striatum as our region of interest (ROI). It is well established that the striatum, especially its anterior part (e.g., caudate head and nucleus accumbens), tracks individuals' reported preference for various types of stimuli (8,(11)(12)(13)(14).…”

mentioning

confidence: 99%

Neural correlates of cognitive dissonance and choice-induced preference change

Izuma

Matsumoto

Murayama³

et al. 2010

Proc. Natl. Acad. Sci. U.S.A.

211

251

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According to many modern economic theories, actions simply reflect an individual's preferences, whereas a psychological phenomenon called "cognitive dissonance" claims that actions can also create preference. Cognitive dissonance theory states that after making a difficult choice between two equally preferred items, the act of rejecting a favorite item induces an uncomfortable feeling (cognitive dissonance), which in turn motivates individuals to change their preferences to match their prior decision (i.e., reducing preference for rejected items). Recently, however, Chen and Risen [Chen K, Risen J (2010) J Pers Soc Psychol 99:573-594] pointed out a serious methodological problem, which casts a doubt on the very existence of this choice-induced preference change as studied over the past 50 y. Here, using a proper control condition and two measures of preferences (self-report and brain activity), we found that the mere act of making a choice can change self-report preference as well as its neural representation (i.e., striatum activity), thus providing strong evidence for choice-induced preference change. Furthermore, our data indicate that the anterior cingulate cortex and dorsolateral prefrontal cortex tracked the degree of cognitive dissonance on a trial-by-trial basis. Our findings provide important insights into the neural basis of how actions can alter an individual's preferences.I n Aesop's Fable "The Fox and the Grapes," a fox tries to get some grapes that are hanging on a high, unreachable vine. After failing to reach them, the fox decides that the grapes were probably sour anyway. An interesting aspect of this story is the idea that actions (e.g., giving up on the grapes) can change preferences. Because the dissonance-induced preference change indicates that behaviors can create, not just reflect, people's preferences, it challenges a vital assumption in neoclassical economics that preference or "hedonic utility" determines people's behavior (1).Since Brehm's original study in 1956 (2), this sort of preference change (i.e., the increase in ratings for chosen goods and/or the decrease in ratings for rejected goods) has been repeatedly observed under the "free-choice paradigm" (3-6). In a typical freechoice study design, participants are asked to: (i) rate their preference for a set of goods (e.g., art prints, CDs, and so forth), (ii) choose between two of the goods, and (iii) rate them again. After making a difficult choice between two equally preferred items at stage ii, individuals tend to like the selected item more and the rejected item less than they originally did (2). This tendency happens because when making a choice between two equally highly preferred items, individuals have to give up either of the two liked items. According to cognitive dissonance theory (7), simultaneously holding two or more contradictory cognitions (e.g., "I like the item" and "I rejected it") causes a psychological discomfort called "cognitive dissonance," and individuals are motivated to reduce this discomfort by changing...

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Neural Antecedents of the Endowment Effect

Cited by 147 publications

References 43 publications

The Endowment Effect as Self-Enhancement in Response to Threat

The Endowment Effect as Self-Enhancement in Response to Threat

Neural correlates of dueling affective reactions to win–win choices

Neural correlates of cognitive dissonance and choice-induced preference change

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