The Endowment Effect on Academic Chores Trade-Off (ACTO)

Abstract

The present study aimed to investigate three questions concerning Kahneman’s Endowment Effect. (a) Does the Endowment Effect apply to negotiations on intangible items such as intellectual resources and time invested in academic chores? (b) Does the sequence in which proposals are presented to the negotiators influence the Endowment Effect and, if so, how? (c) Does the Endowment Effect have the same impact in on-going negotiations as in one-shot negotiations? The investigation focused on the trade-off made by students between advanced courses and seminars, which we term as Academic Chores Trade-Off (ACTO). The results indicated the existence of the Endowment Effect in negotiations on the above intangible items (ACTO) but could also be partially interpreted as reflecting the negotiators attempts to improve their positions. The results also supported the existence of a Sequence Effect combined with an intensification of the Endowment Effect. The Endowment Effect in on-going negotiations was not found to be significantly different from that in the one-shot format. Copyright Springer 2006endowment effect, one-shot negotiations, on-going negotiations, sequence effect,

Proposal sequence and the endowment effect in negotiations

“…A "sense" of ownership or even virtual ownership is enough (Gimpel, 2007). Research findings (De Dreu et al, 1994;Kahneman and Knetsch, 1992;Bazerman et al, 1985;Galin et al, 2006) indicate that such unreasonable differences between buyers and sellers, resulting from the endowment effect, exist far beyond "buy low-sell high" economic logic and is insufficiently explained by micro-economic theory.…”

“…Accordingly, object possessors -or those who have a sense of possession -sustain the view that "selling" their object is a "loss", and thus become "risk seeking". To compensate for their feelings of loss, they raise the negotiation stakes, demanding an unreasonable price, which they themselves would not be willing to pay if they were the "buyers" (Thaler, 1994;Knetsch and Sinden, 1984;Knetsch, 1989;Kahneman et al, 1990;Kahneman and Knetsch, 1992;Ortona and Scacciati, 1992;Hoorens et al, 1999;Van Boven et al, 2003;Galin et al, 2006).…”