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

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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.

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