Bad riddance or good rubbish? Ownership and not loss aversion causes the endowment effect

Giving the Self

Prosocial actions often involve giving something that represents one’s essence, be it one’s name (e.g., signature), personal possessions, or body (e.g., blood donation). This research compares such “self-giving” to the giving of resources of comparable value that are less connected to one’s essence. We show in five studies that self-giving embeds givers with a sense of commitment and generosity. Specifically, giving endowed objects (vs. briefly owned objects), one’s signature (vs. anonymous support), and blood (vs. a comparable amount of money) all increased perceptions of commitment and generosity among givers. As a result, givers were more likely to continue supporting that cause in the long run.

An off-the-shelf, authentic, and versatile undergraduate molecular biology practical course

We provide a prepackaged molecular biology course, which has a broad context and is scalable to large numbers of students. It is provided complete with technical setup guidance, a reliable assessment regime, and can be readily implemented without any development necessary. Framed as a forensic examination of blue/white cloning plasmids, the course is a versatile workbench, adaptable to different degree subjects, and can be easily modified to undertake novel research as part of its teaching activities. Course activities include DNA extraction, RFLP, PCR, DNA sequencing, gel electrophoresis, and transformation, alongside a range of basic microbiology techniques. Students particularly appreciated the relevance of the practical to professional practice and the authenticity of the experimental work.

We are more selfish than we think: The endowment effect and reward processing within the human medial-frontal cortex

Perceived ownership has been shown to impact a variety of cognitive processes: attention, memory, and--more recently--reward processing. In the present experiment we examined whether or not perceived ownership would interact with the construct of value-the relative worth of an object. Participants completed a simple gambling game in which they gambled either for themselves or for another while electroencephalographic data were recorded. In a key manipulation, gambles for oneself or for another were for either small or large rewards. We tested the hypothesis that value affects the neural response to self-gamble outcomes, but not other-gamble outcomes. Our experimental data revealed that while participants learned the correct response option for both self and other gambles, the reward positivity evoked by wins was impacted by value only when gambling for oneself. Importantly, our findings provide additional evidence for a self-ownership bias in cognitive processing and further demonstrate the insensitivity of the medial-frontal reward system to gambles for another.

How beliefs about self-creation inflate value in the human brain

Humans have a tendency to overvalue their own ideas and creations. Understanding how these errors in judgement emerge is important for explaining suboptimal decisions, as when individuals and groups choose self-created alternatives over superior or equal ones. We show that such overvaluation is a reconstructive process that emerges when participants believe they have created an item, regardless of whether this belief is true or false. This overvaluation is observed both when false beliefs of self-creation are elicited (Experiment 1) or implanted (Experiment 2). Using brain imaging data we highlight the brain processes mediating an interaction between value and belief of self-creation. Specifically, following the creation manipulation there is an increased functional connectivity during valuation between the right caudate nucleus, where we show BOLD activity correlated with subjective value, and the left amygdala, where we show BOLD activity is linked to subjective belief. Our study highlights psychological and neurobiological processes through which false beliefs alter human valuation and in doing so throw light on a common source of error in judgements of value.

From Effort to Value: Preschool Children's Alternative to Effort Justification

In the current studies, we addressed the development of effort-based object valuation. Four- and 6-year-olds invested either great or little effort in order to obtain attractive or unattractive rewards. Children were allowed to allocate these rewards to an unfamiliar recipient (dictator game). Investing great effort to obtain attractive rewards (a consonant situation) led 6-year-olds, but not 4-year-olds, to enhance the value of the rewards and thus distribute fewer of them to others. After investing effort to attain unattractive rewards (a dissonant situation), 6-year-olds cognitively reduced the dissonance between effort and reward quality by reappraising the value of the rewards and thus distributing fewer of them. In contrast, 4-year-olds reduced the dissonance behaviorally by discarding the rewards. These findings provide evidence for the emergence of an effort-value link and underline possible mechanisms underlying the primacy of cognitive versus behavioral solutions to dissonance reduction.

Explanations of the endowment effect: an integrative review

The endowment effect is the tendency for people who own a good to value it more than people who do not. Its economic impact is consequential. It creates market inefficiencies and irregularities in valuation such as differences between buyers and sellers, reluctance to trade, and mere ownership effects. Traditionally, the endowment effect has been attributed to loss aversion causing sellers of a good to value it more than buyers. New theories and findings--some inconsistent with loss aversion--suggest evolutionary, strategic, and more basic cognitive origins. In an integrative review, we propose that all three major instantiations of the endowment effect are attributable to exogenously and endogenously induced cognitive frames that bias which information is accessible during valuation.

The evolutionary roots of human decision making

Humans exhibit a suite of biases when making economic decisions. We review recent research on the origins of human decision making by examining whether similar choice biases are seen in nonhuman primates, our closest phylogenetic relatives. We propose that comparative studies can provide insight into four major questions about the nature of human choice biases that cannot be addressed by studies of our species alone. First, research with other primates can address the evolution of human choice biases and identify shared versus human-unique tendencies in decision making. Second, primate studies can constrain hypotheses about the psychological mechanisms underlying such biases. Third, comparisons of closely related species can identify when distinct mechanisms underlie related biases by examining evolutionary dissociations in choice strategies. Finally, comparative work can provide insight into the biological rationality of economically irrational preferences.

What Is Implicit Self-Esteem, and Does it Vary Across Cultures?

Implicit self-esteem (ISE), which is often defined as automatic self-evaluations, fuses research on unconscious processes with that on self-esteem. As ISE is viewed as immune to explicit control, it affords the testing of theoretical questions such as whether cultures vary in self-enhancement motivations. We provide a critical review and integration of the work on (a) the operationalization of ISE and (b) possible cultural variation in self-enhancement motivations. Although ISE measures do not often vary across cultures, recent meta-analyses and empirical studies question the validity of the most common way of defining ISE. We revive an alternative conceptualization that defines ISE in terms of how positively people evaluate objects that reflect upon themselves. This conceptualization suggests that ISE research should target alternative phenomena (e.g., minimal group effect, similarity-attraction effect, endowment effect) and it allows for a host of previous cross-cultural findings to bear on the question of cultural variability in ISE.

How affectively-based and cognitively-based attitudes drive intergroup behaviours: the moderating role of affective-cognitive consistency

The moderating role of affective-cognitive consistency in the effects of affectively-based and cognitively-based attitudes on consummatory and instrumental behaviors was explored using two experimental studies in the intergroup context. Study 1 revealed that affectively-based attitudes were better predictors than cognitively-based attitudes regardless of affective-cognitive consistency for consummatory behaviors (e.g., undergraduates’ supportive behaviors toward government officials). Study 2, which investigated task groups’ supportive behaviors toward an immediate supervisory group, found that for these instrumental behaviors cognitively-based attitudes were better predictors than affectively-based attitudes only when affective-cognitive consistency was high. The present research also examined the mechanism by which affective-cognitive consistency moderates the relative roles of affectively-based and cognitively-based attitudes in attitude-behavior consistency. Results indicated that attitude-behavior consistency is eroded primarily because of the weaker relationship of affective or cognitive components to behaviors than to general attitudes. The reciprocal implications of research on attitudes and work on intergroup relations are considered.

There and up again: on the uses and misuses of neuroimaging in psychology

The aim of this article is to discuss the conditions under which functional neuroimaging can contribute to the study of higher cognition. We begin by presenting two case studies--on moral and economic decision making--which will help us identify and examine one of the main ways in which neuroimaging can help advance the study of higher cognition. We agree with critics that functional magnetic resonance imaging (fMRI) studies seldom "refine" or "confirm" particular psychological hypotheses, or even provide details of the neural implementation of cognitive functions. However, we suggest that neuroimaging can support psychology in a different way--namely, by selecting among competing hypotheses of the cognitive mechanisms underlying some mental function. One of the main ways in which neuroimaging can be used for hypothesis selection is via reverse inferences, which we here examine in detail. Despite frequent claims to the contrary, we argue that successful reverse inferences do not assume any strong or objectionable form of reductionism or functional locationism. Moreover, our discussion illustrates that reverse inferences can be successful at early stages of psychological theorizing, when models of the cognitive mechanisms are only partially developed.

Real and hypothetical endowment effects when exchanging lottery tickets: Is regret a better explanation than loss aversion?

The endowment effect is the finding that possession of an item adds to its value. We introduce a new procedure for testing this effect: participants are divided into two groups. Possession group participants inspect a numbered lottery ticket and know it is theirs, while inspection group participants only inspect a lottery ticket without being endowed with it. Subsequently participants choose between playing the lottery with this (possessed or inspected) ticket, or exchanging it for another one. Our procedure tests for the effect of endowment while controlling for the influence of transaction costs as well as for inspection effects and the influence of bargaining roles (buyer vs. seller), which often afflict experimentation with the endowment effect. In a real setting, tickets in possession were valued significantly higher than inspected tickets. Contrary to some findings in the literature participants also correctly predicted these valuation differences in a hypothetical situation, both for themselves as well as for others. Furthermore, our results suggest that regret rather than loss aversion may be the source of the endowment effect in an experimental setting using lottery tickets. Applying our procedure to a setting employing riskless objects in form of mugs revealed rather ambiguous results, thus emphasizing that the role of regret might be less prominent in non-lottery settings.

Artifacts and essentialism

Psychological essentialism is an intuitive folk belief positing that certain categories have a non-obvious inner "essence" that gives rise to observable features. Although this belief most commonly characterizes natural kind categories, I argue that psychological essentialism can also be extended in important ways to artifact concepts. Specifically, concepts of individual artifacts include the non-obvious feature of object history, which is evident when making judgments regarding authenticity and ownership. Classic examples include famous works of art (e.g., the Mona Lisa is authentic because of its provenance), but ordinary artifacts likewise receive value from their history (e.g., a worn and tattered blanket may have special value if it was one's childhood possession). Moreover, in some cases, object history may be thought to have causal effects on individual artifacts, much as an animal essence has causal effects. I review empirical support for these claims and consider the implications for both artifact concepts and essentialism. This perspective suggests that artifact concepts cannot be contained in a theoretical framework that focuses exclusively on similarity or even function. Furthermore, although there are significant differences between essentialism of natural kinds and essentialism of artifact individuals, the commonalities suggest that psychological essentialism may not derive from folk biology but instead may reflect more domain-general perspectives on the world.

On the descriptive value of loss aversion in decisions under risk: Six clarifications

Previous studies of loss aversion in decisions under risk have led to mixed results. Losses appear to loom larger than gains in some settings, but not in others. The current paper clarifies these results by highlighting six experimental manipulations that tend to increase the likelihood of the behavior predicted by loss aversion. These manipulations include: (1) framing of the safe alternative as the status quo; (2) ensuring that the choice pattern predicted by loss aversion maximizes the probability of positive (rather than zero or negative) outcomes; (3) the use of high nominal (numerical) payoffs; (4) the use of high stakes; (5) the inclusion of highly attractive risky prospects that creates a contrast effect; and (6) the use of long experiments in which no feedback is provided and in which the computation of the expected values is difficult. In addition, the results suggest the possibility of learning in the absence of feedback: The tendency to select simple strategies, like “maximize the worst outcome” which implies “loss aversion”, increases when this behavior is not costly. Theoretical and practical implications are discussed.

The endowment effect can extend from self to mother: evidence from an fMRI study

People typically demand more to part with goods they own than they would be willing to pay to acquire identical goods they do not own, a phenomenon known as the endowment effect [1-3]. Recently, a large body of behavioral research has suggested that the endowment effect may actually be a type of self-referent cognitive bias resulting from ownership of an object. However, the neural underpinnings of this effect are not well understood. In the present study, we used functional magnetic resonance imaging (fMRI) to explore whether brain activity can predict the extensibility of the endowment effect to items owned by another individual with a close relationship to the subject. Subjects were asked to decide whether to buy or sell their own or their mothers' possessions at various prices. Behavioral results showed an endowment effect not only for goods owned by the subjects, but also for goods owned by the subjects' mothers, providing evidence for the extensibility of the endowment effect. Neuroimaging data showed activation in the medial prefrontal cortex (MPFC) and insula in both ownership conditions. Also, MPFC activation was positively correlated with the behavioral indifference point in the sell-for-self and sell-for-mother conditions. Furthermore, psychophysiological interaction (PPI) analysis revealed that MPFC activation was accompanied by increased functional integration with insula and striatum. Together, these findings suggest that MPFC may play an important role in the extensibility of the endowment effect.

The Influence of Differential Focus on the Endowment Effect in Risky Objects

The robust finding that people systematically assign higher monetary values to sell a good they own than they pay to acquire it (i.e., the endowment effect) was recently explained by the differential importance of positive and negative object properties, depending on endowment state. Whether this explanation can also be applied to objects with risky outcomes is not clear. Two studies using lottery tickets were designed to examine the effects of focusing on aspects consistent with a person’s endowment state (i.e., probability of winning and size of winnings for owners; probability of losing and price of lottery ticket for nonowners) or inconsistent with it. In line with previous research on consumer products, both studies showed an endowment effect for lottery tickets when participants focused on consistent aspects, but not when they focused on inconsistent aspects. We conclude that, although price decisions are mainly influenced by endowment state, the underlying focus on specific properties likely plays a role in the endowment effect for risky objects.

The nonobvious basis of ownership: preschool children trace the history and value of owned objects

For adults, ownership is nonobvious: (a) determining ownership depends more on an object's history than on perceptual cues, and (b) ownership confers special value on an object ("endowment effect"). This study examined these concepts in preschoolers (2.0-4.4) and adults (n=112). Participants saw toy sets in which 1 toy was designated as the participant's and 1 as the researcher's. Toys were then scrambled and participants were asked to identify their toy and the researcher's toy. By 3years of age, participants used object history to determine ownership and identified even undesirable toys as their own. Furthermore, participants at all ages showed an endowment effect (greater liking of items designated as their own). Thus, even 2-year-olds appreciate the nonobvious basis of ownership.

Disclosing information about the self is intrinsically rewarding

Humans devote 30-40% of speech output solely to informing others of their own subjective experiences. What drives this propensity for disclosure? Here, we test recent theories that individuals place high subjective value on opportunities to communicate their thoughts and feelings to others and that doing so engages neural and cognitive mechanisms associated with reward. Five studies provided support for this hypothesis. Self-disclosure was strongly associated with increased activation in brain regions that form the mesolimbic dopamine system, including the nucleus accumbens and ventral tegmental area. Moreover, individuals were willing to forgo money to disclose about the self. Two additional studies demonstrated that these effects stemmed from the independent value that individuals placed on self-referential thought and on simply sharing information with others. Together, these findings suggest that the human tendency to convey information about personal experience may arise from the intrinsic value associated with self-disclosure.

For Whom Is Parting With Possessions More Painful?

The endowment effect—the tendency for owners (potential sellers) to value objects more than potential buyers do—is among the most widely studied judgment and decision-making phenomena. However, the current research is the first to explore whether the effect varies across cultures. Given previously demonstrated cultural differences in self-construals and self-enhancement, we predicted a smaller endowment effect for East Asians compared with Westerners. Two studies involving buyers and sellers of a coffee mug (Study 1a) and a box of chocolates (Study 1b) supported this prediction. Study 2 conceptually replicated this cultural difference by experimentally manipulating independent and interdependent self-construals. Finally, Study 3 provided evidence for an underlying self-enhancement mechanism: Cultural differences emerged when self-object associations were made salient, but disappeared when self-object associations were minimized. Thus, the endowment effect may be influenced by the degree to which independence and self-enhancement (vs. interdependence and self-criticism) are culturally valued or normative.