Possession effect

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The endowment also endowment effect ( English endowment effect is) one hypothesis from the behavior economics . It says that people tend to value a good more valuable when they own it. The hypothesis goes back to the American economist Richard Thaler , who gave the property effect its name.

Through the endowment can willingness to pay and willingness for sale ( English willingness to accept ) fall apart an individual for one and the same good. The hypothesis thus contradicts the basic assumption of the neoclassical theory that people make decisions based on rational preferences. Likewise, the possession effect is not compatible with the Coase theorem , which is largely accepted in economics .

Comparable is the IKEA effect , which denotes the increase in appreciation that self-designed or at least self-assembled objects are shown in comparison to mass-produced products that are bought ready-made.

discovery

In 1980 the possession effect was first mentioned in the article Toward a Positive Theory of Consumer Choice by Richard Thaler. Thaler already documented economic irrationalities in the behavior of his fellow human beings during his studies in the early 1970s. He describes an example that was later taken up by one of his professors, a wine lover, as follows:

"Mr. R bought a case of good wine in the late 50's for about $ 5 a bottle. A few years later his wine merchant offered to buy the wine back for $ 100 a bottle. He refused, although he has never paid more than $ 35 for a bottle of wine. "

Assuming rational preferences, traditional economic theory would assume that the professor assigns a precisely defined value to each bottle. This value would correspond to the benefit that creates the bottle to the professor, and both would be willing to pay ( English willingness to pay , short WTP ) and the willingness to accept compensation payments, so the willingness for sale ( English willingness to accept short WTA ) determine . For a homo economicus , WTP and WTA would be identical. In fact, however, the value of the bottle for the professor as a seller was significantly higher at over $ 100 than in the buyer's role with a maximum of $ 35. From this and a number of similar observations, Thaler concluded that this unusual behavior must not have been a coincidence, but a genuine effect, which he named the possession effect.

Theoretical background

Thaler recognized the importance of the prospect theory published shortly before by Daniel Kahneman and Amos Tversky in his first publication on the subject . According to prospect theory, the utility of a state of wealth is determined not only by the state of wealth itself, but also in relation to a reference point, the status quo . Another assumption is loss aversion . In summary, the theory says that deteriorations compared to the status quo are interpreted as losses and these are weighted more heavily than corresponding gains. The Prospect Theory provided Thaler with a logical explanation for the behavior he observed. If the professor bought a bottle of wine, it was a gain for him that provided a corresponding benefit. This benefit level determines the WTP. However, if the professor owned the bottle of wine, the sale would have been interpreted as a loss or deterioration compared to the status quo. The deterioration would correspond to a negative benefit, the amount of which would be greater than that of the aforementioned profit benefit. The minimum required compensation for the loss, the WTA, would therefore be above the maximum willingness to pay for the profit. The difference between WTP and WTA observed by Thaler could be explained.

Psychological experiments

An experiment with cups that Daniel Kahneman carried out in 1990 is known. He formed two groups. He gave cups to the first group (the vendors) and asked them what price, between $ 9.25 and $ 0.25, they would ask if they had to sell the cup. Participants in the second group were asked what price they would pay to receive the cup. The "sales group" averaged $ 7.12, while the "buy group" averaged $ 2.87.

Another experiment involved a ticket to a basketball game. Since the university and the university's basketball hall are small, a large number of people waiting in line regularly do not receive a ticket despite long lines. The staff of Dan Ariely and Ziv Carmon then posed as ticket scalpers and asked ticket holders, the amount for which they would sell their tickets - average were called $ 2400th The students without a ticket were on average willing to pay $ 170 for a ticket. Ticket owners often justified the high prices with the importance of the game (e.g. that they were indulging in an important experience that they could tell their children about). The people asked without a ticket put the amounts of money in relation to other amounts of money, such as the expenses when going out or drinking beer.

application areas

The possession effect can be relevant for many areas. Knowing the ownership effect initially helps sellers to realistically assess the market value of their goods. For example, an independent appraiser can be used to assess the property .

  • Taxes : According to the property effect, the willingness to evade tax is higher (if all other factors are constant ) if the tax has to be paid back. It is lower if the taxpayer has made an advance payment and can therefore expect repayment.
  • Job: Employees and unemployed people assess the value of a job (and e.g. related social structures) differently.
  • Relationships: "Do you have your girlfriend because you love her or do you love her because you have her?" (After Ivo Bischoff ).
  • Regulation: The effect also plays a role in the field of regulation economics. He helps z. B. when considering quality regulation in network sectors such as water supply.

literature

  • Jack L. Knetsch: The Endowment Effect and Evidence of Nonreversible Indifference Curves. In: The American Economic Review . Vol. 79, No. 5, December 1989, pp. 1277-1284.

Web links

Individual evidence

  1. ↑ Gabler Wirtschaftslexikon: Possession Effect ; accessed on June 11, 2018.
  2. ↑ Röckelein, JE (2006). Elsevier's Dictionary of Psychological Theories. Amsterdam: Elsevier Science & Technology.
  3. ^ Thaler, RH (1980). Toward a Positive Theory of Consumer Choice. Journal of Economic Behavior and Organization, 1 (1), 39-60.
  4. ↑ Kahneman, D. (2012). Fast thinking, slow thinking. Munich: settlers.
  5. ^ Thaler, RH (1980). Toward a Positive Theory of Consumer Choice. Journal of Economic Behavior and Organization, 1 (1), 39-60.
  6. ↑ Rabin, M. (1998). Psychology and Economics. Journal of Economic Literature , 36 (1), 11-46.
  7. ↑ Carmon, Z., & Ariely, D. (2000). Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers. Journal of Consumer Research, 27 (3), 360-370.
  8. ↑ Kahneman, D., Knetsch, JL, & Thaler, RH (1990). Experimental Tests of the Endowment Effect and the Coase Theorem. Journal of Political Economy , 98 (6), 1325-1348.
  9. ↑ Kahneman, D. (2012). Fast thinking, slow thinking. Munich: settlers.
  10. ^ Thaler, RH (1980). Toward a Positive Theory of Consumer Choice. Journal of Economic Behavior and Organization, 1 (1), 39-60.
  11. ↑ Kahneman, D. (2012). Fast thinking, slow thinking. Munich: settlers.
  12. ↑ Abdellaoui, M., Bleichrodt, H., & Paraschiv, C. (2007). Loss Aversion Under Prospect Theory: A Parameter-Free Measurement. Management Science, 53 (10), 1659-1674.
  13. ^ Daniel Kahneman, Jack L. Knetsch, Richard H. Thaler: Experimental Test of the Endowment Effect and the Coase Theorem. In: Journal of Political Economy . Vol. 98, No. 6, 1991, pp. 1325-1348 ( online ).
  14. ^ Ziv Carmon, Dan Ariely: Focusing on the Forgone: How Value Can Appear So Different to Buyers and Sellers. In: Journal of Consumer Research . Vol. 27, 2000, pp. 360–370 ( online ( memento of the original from March 4, 2016 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove it Note. ). @1@ 2Template: Webachiv / IABot / people.duke.edu
  15. ↑ Pamela L. Booth, Todd Guilfoos, Emi Uchida: Endowment Effects and Drinking Water Quality . In: Agricultural and Resource Economics Review . tape 45 , no. 2 , August 2016, ISSN  2372-2614 , p. 338–366 , doi : 10.1017 / age.2016.23 ( cambridge.org [accessed July 3, 2020]).