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Multiple-Unit Holdings Yield Attenuated Endowment Effects

Author

Listed:
  • Katherine Burson

    (Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • David Faro

    (London Business School, London NW1 4SA, United Kingdom)

  • Yuval Rottenstreich

    (Stern School of Business, New York University, New York, New York 10011)

Abstract

Previous endowment effect experiments have examined circumstances in which people encounter a single unit of a good (e.g., one chocolate). We contrast single-unit treatments with multiple-unit treatments in which participants encounter several units of a good (e.g., five chocolates). We observe endowment effects of typical magnitude for singleton holdings but attenuated endowment effects for multiple-unit holdings. Moreover, endowment effects consistently arise for singletons even as the definition of a unit is altered. For instance, participants holding one piece of chocolate show an endowment effect of standard size, but so do participants holding one box of chocolates. Yet the box contains about 20 individual pieces of chocolate, and participants given that many separate pieces show a substantially attenuated endowment effect. We thus propose the property of "unit dependence": the definition of a unit can change, but contingent on any given definition, a pronounced endowment effect may emerge for singletons but not multiples. This paper was accepted by Teck Ho, decision analysis.

Suggested Citation

  • Katherine Burson & David Faro & Yuval Rottenstreich, 2013. "Multiple-Unit Holdings Yield Attenuated Endowment Effects," Management Science, INFORMS, vol. 59(3), pages 545-555, November.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:3:p:545-555
    DOI: 10.1287/mnsc.1120.1562
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    2. Eyal Ert & Ido Erev, 2013. "On the descriptive value of loss aversion in decisions under risk: Six clarifications," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(3), pages 214-235, May.
    3. William Boulding & Abhijit Guha & Richard Staelin, 2017. "Do We Really Need to Change the Decision Maker? Counterintuitive Escalation of Commitment Results in Real Options Contexts," Management Science, INFORMS, vol. 63(10), pages 3459-3472, October.
    4. Yan Sun & Barbara Mellers, 2016. "Trade-upgrade framing effects: Trades are losses, but upgrades are improvements," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 11(6), pages 582-588, November.
    5. repec:cup:judgdm:v:11:y:2016:i:6:p:582-588 is not listed on IDEAS
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    8. Gökçe Esenduran & James A. Hill & In Joon Noh, 2020. "Understanding the Choice of Online Resale Channel for Used Electronics," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1188-1211, May.
    9. Babaioff, Moshe & Dobzinski, Shahar & Oren, Sigal, 2022. "Combinatorial auctions with endowment effect," Games and Economic Behavior, Elsevier, vol. 136(C), pages 255-273.

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