The Endowment Effect and Its Reversal: Examining Possession Loss Aversion and Focus of Attention

Mauricio Palmeira, Indiana University
The endowment effect, a well-known phenomenon in behavioral decision research, is typically described as a consequence of loss aversion. Recently a new type of loss aversion, namely possession loss aversion (PLA), has been proposed as an additional explanation for the effect. An important consequence of PLA is the reversal of the endowment effect for unattractive items. I extend this investigation examining the predictions of an attention-based mechanism when unattractive items are under consideration. Results from a series of pricing studies suggest that the effects due to possession may not be due to a psychophysical property like PLA, but rather to a heightened attention to the possessed item.
[ to cite ]:
Mauricio Palmeira (2008) ,"The Endowment Effect and Its Reversal: Examining Possession Loss Aversion and Focus of Attention", in NA - Advances in Consumer Research Volume 35, eds. Angela Y. Lee and Dilip Soman, Duluth, MN : Association for Consumer Research, Pages: 705-706.