Phantom Limb and a New Approach to Understanding the WTA–WTP Disparity

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Two main theories explain the endowment effect: loss aversion and attachment. We draw from neuroscience literature on the malleability of human perception to disentangle the impact of loss aversion and attachment on the endowment effect. Through a visual manipulation, we first examined how valuation of an object changed. After this, participants as buyers and sellers provided their willingness to pay (WTP) and willingness to accept (WTA), respectively. The results across the studies offer important insights into the role of attachment and loss aversion in the WTA–WTP disparity. The loss aversion account would not predict any change in WTA–WTP disparity across control and experimental groups, whereas the attachment account would predict an increase in both WTP and WTA from control to experimental conditions. Our results are inconsistent with both accounts and hint at a more nuanced view of a multiplicative or joint influence of loss aversion and attachment on WTA–WTP disparity.

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