Uncertainty Exacerbates the Endowment Effect

Michael Liersch , New York University, USA
Yuval Rottenstreich, New York University, USA
Howard Kunreuther , University of Pennsylvania, USA
Min Gong , Columbia University, USA
In standard endowment effect studies, participants cannot lose their holdings. However, real-world endowments are often uncertain. Accordingly, we examine how uncertainty impacts reluctance to trade by extending standard paradigms: after trades are completed, there is a 50% chance participants will lose their holdings. We find that uncertainty exacerbates the reluctance to trade.
[ to cite ]:
Michael Liersch , Yuval Rottenstreich, Howard Kunreuther , and Min Gong (2011) ,"Uncertainty Exacerbates the Endowment Effect", in NA - Advances in Consumer Research Volume 38, eds. Darren W. Dahl, Gita V. Johar, and Stijn M.J. van Osselaer, Duluth, MN : Association for Consumer Research.