Endowment Effect: Trading for Oneself Versus Trading for Others

Abstract

Prior research on the endowment effect has tended to focus on decisions made by individuals acting on their own account rather than on others’ behalf. This article reports on three experiments that modeled this “for-self” versus “for-others” distinction and measured its effects on prices. Specifically, our participants who were asked to make trading decisions for other people subsequently reported decreases in the endowment effect. We concluded that, in the context of the trading of goods, perceived ownership and differences in focus on the traded products’ positive and negative features mediated the diminished endowment effect our experiments identified.

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