The role of emotions in the endowment effect

Lin, Chien Huang; Chuang, Shih Chieh; Kao, Danny Tengti; Kung, Chaang Yung

doi:10.1016/j.joep.2005.10.001

Cited by 51 publications

(29 citation statements)

References 29 publications

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“…On the other hand, Lerner et al (2004) find that induced negative feelings such as sadness and disgust reduce the WTP-WTA disparity because subjects want to escape from their negative emotion by changing their current environment through selling their endowed goods and buying goods that they do not own. Lin et al (2006) find similar results using induced negative feelings.…”

Section: Context-dependent and Endogenous Preferencessupporting

confidence: 65%

Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy

Kim¹,

Kling

Zhao³

2015

Annu. Rev. Resour. Econ.

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The often observed empirical divergence between WTA and WTP measures of welfare change continues to be a topic of interest to both theoretical and applied economists. The divergence has particularly important implications for environmental policy. In this paper, we review behavioral and other explanations of the disparity with a focus on their connections to neoclassical welfare theory, and evaluate the empirical evidence of these explanations through the same lens. Some explanations of the disparity are consistent with neoclassical models and some are not. Likewise, some imply that the divergences are attributed to underlying preferences (neoclassical or not) while others suggest the divergences are due to elicitation methods, cognitive limitations, or other non-preference related reasons. We argue that the source of the divergence can inform the choice of which measure, WTP or WTA, to use in a given empirical application.

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Section: Context-dependent and Endogenous Preferencessupporting

confidence: 65%

Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy

Kim¹,

Kling

Zhao³

2015

Annu. Rev. Resour. Econ.

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“…We can then compare the effects of inducing regret and disappointment not only to each other, but also to a neutral control condition. Such a neutral control was not present in the Lin et al (2006) and the Lerner et al (2004) research.…”

Section: Introductionmentioning

confidence: 81%

“…For example, Lin, Chuang, Kao, and Kung (2006) had participants experience either positive or negative emotionsvia recalling unrelated past emotional events and also via unrelated audiovisual stimuli. Next, participants were asked to evaluate how much they would be willing to accept in return for a mug they were endowed with, or how much they would be willing to pay for a mug that was not part of their endowment.…”

Section: Introductionmentioning

confidence: 99%

Regret, disappointment and the endowment effect

Martinez

Zeelenberg

Rijsman

2011

Journal of Economic Psychology

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(This is a sample cover image for this issue. The actual cover is not yet available at this time.)This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and education use, including for instruction at the authors institution and sharing with colleagues. a b s t r a c tThe endowment effect is the finding that minimum selling prices for a particular good exceed maximum buying prices. We build on and extend previous research showing that emotions influence the endowment effect, and reveal that the two negatively valenced decision-related emotions, regret and disappointment, have distinct effects on the valuation of an object. We found that an induction of regret eliminates the classic endowment effect, whereas an induction of disappointment reverses it. The findings demonstrate the necessity of a specific emotion approach to understand the effects on decision making.

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“…Previous studies have manipulated the magnitude of the endowment effect by framing or priming subjects with regret (Loewenstein & Issacharoff 1994;Lerner, Small, and Loewenstein 2004;Lin, Chuang, Kao, and Kung 2006;Ritov & Baron 1992;Martinez, Zeelenberg, Rijsman 2011;Wang 2009;Zhang and Fischbach 2005), but to our knowledge, this is the first article to show the causal link between responsibility and regret as a source of the endowment effect and to use this relationship to explain the debiasing effect of agency and markets. We also are the first to show that endowed people can and will voluntarily debias if given the opportunity to do so.…”

mentioning

confidence: 99%

“…12 See supra note 7. E.g., Camerer (2005); Bar-Hillel & Netter (1996); Maimaran (2011); Loewenstein & Issacharoff (1994); Zhang & Fishbach (2005); Lin, Chuang, Kao, & Kung (2006); Martinez, Zeelenberg, & Rijsman (2011). The role of emotion in human decision making rejects the idea that people employ any single unitary decision making program (such as Rational Choice theory or Prospect Theory) to make all decisions.…”

mentioning

confidence: 99%