when do losses loom larger than gains abstract in defining limits to loss aversion novemsky and kahneman 2005 offer important new data and a needed summary of appropriate ways to think about loss aversion in this comment to novemsky and kahneman s article the authors consider the new empirical results that involve probabilistic buying and selling suggesting caution in generalizing the results to nonprobabilistic commerce the authors expand novemsky and kahneman s summary by exploring two critical constructs that help define the boundaries of loss aversion emotional attachment and cognitive perspective emotional attachment alters loss aversion by moderating the degree to which parting with an item involves a loss whereas shifts in cognitive perspective explain why items typically viewed as a loss are given more or less weight the goal is to use these constructs to characterize more specifically contexts in which losses loom larger than gains and to suggest specific ways that research into loss aversion could evolve

multiple communities and controlling corruption corruption presents an assurance problem to businesses all businesses are best off if none act corruptly but in the event that corruption occurs are better off if they act corruptly than if they do not and because there is no assurance that other actors are not cheating a business does not know how to act the usual solution to an assurance problem criminal sanctions imposed on cheaters does not work in a corrupt system integrative social contract theory suggests a solution to the assurance problem application of integrative social contract theory to corruption demonstrates that in the case of corruption it has advantages over international law and that the theory s elegance lies in its recognition of norms generated by multiple communities

unfixed resources perceived costs consumption and the accessible account effect consumption depletes one s available resources but consumers may be unaware of the total resources available for consumption and therefore be influenced by the temporary accessibility of resource accounts consistent with this possibility consumers in four experiments perceived a unit of consumption to be smaller and consequently consumed more when large resource accounts of money calories or time e g the money in their savings account were made temporarily accessible compared with when small resource accounts were made temporarily accessible e g the money in their wallet manipulating the cognitive accessibility of resources available for consumption influences both subjective judgment and behavior

institutional selection in international relations state anarchy as order by the end of the medieval era three new competing institutions attempted to capture gains from trade and reduce feudal particularism sovereign territorial states cityleagues and city states by the middle of the seventeenth century city leagues and city states had declined markedly territorial states survived as the dominant form because they were able to reduce free riding lower transaction costs and credibly commit their constituents the selection process took place along three dimensions first sovereign territorial states proved competitively superior in the economic realm second states increasingly recognized only other sovereign territorial states as legitimate actors in the international system third other actors defected to or copied the institutional makeup of sovereign territorial organization the emergence of discrete territorial units in which only sovereign authorities represented their citizens as the predominant type of organization in international affairs created a new solution to the problem of markets and hierarchies

the denomination effect labeled the denomination effect study 1 shows in three field studies that the likelihood of spending is lower when an equivalent sum of money is represented by a single large denomination e g one 20 bill relative to many smaller denominations e g 20 1 bills in two of the three field studies individuals spent more once the decision to spend had been made study 2 then shows that consumers deliberately choose to receive money in a large denomination relative to small denominations when there is a need to exert self control in spending study 3 further shows that the denomination effect is contingent on individual differences in people s desire to reduce the pain of paying associated with spending the results suggest that the denomination effect occurs because large denominations are psychologically less fungible than smaller ones allowing them to be used as a strategic device to control and regulate spending

keeping your gains close but your money closer the prepayment effect in riskless choices abstract although research on loss aversion now spans more than three decades researchers are still debating whether or in which cases the finding holds true for money we contribute to this debate by exploring how prepayment affects financial decisions in one set of experiments we show that when faced with a tradeoff between post and prepayment participants overvalue prepaid money and sometimes even prefer it over objectively higher gains importantly this effect was more pronounced when prepayment was more distant from its pure representation in dollars and cents experiment 1a as well as when potential losses were directly linked to specific options experiment 1b as far as the processes involved our results suggest that prepayment leads to increased personal commitment to prepaid options experiment 1c in a second set of experiments we show that even when the tradeoff element is eliminated participants are more motivated and engaged in a task that is prepaid rather than post paid experiments 2a and 2b based on our findings we discuss how firms can use prepayment mechanisms to get more out of their agents and how individuals can be motivated to better utilize their money

correlates of narrow bracketing we examine whether different phenomena of narrow bracketing can be traced back to some common characteristic and whether and how different phenomena are related we find that making dominated lottery choices or ignoring the endowment when making risky choices are related phenomena and are both associated with low levels of cognitive reflection in contrast the phenomena of setting narrow goals or narrow mental budgets seem not to reflect choice errors due to low cognitive reflection but are tools to overcome self control problems buying small scale insurance is associated with having narrow mental budgets suggesting that people buy such insurance to insure themselves against the consequences of their own self control strategy

the boundaries of loss aversion abstract in this article the authors propose some psychological principles to describe the boundaries of loss aversion a key idea is that exchange goods that are given up as intended do not exhibit loss aversion for example the authors propose that money given up in purchases is not generally subject to loss aversion the results of several experiments provide preliminary support for the hypotheses the authors find that consistent with prospect theory loss aversion provides a complete account of risk aversion for risks with equal probability to win or lose the authors propose boundaries for this result and suggest further tests of the model

linking loss aversion and present bias with overspending behavior of tourists insights from a lab in the field experiment abstract building upon prospect theory and hyperbolic time discounting models we explore how behavioral factors influence the probability of overspending among outbound leisure travelers we construct our data in two steps first we collect demographics and travel related variables from a random sample of 314 singaporean tourists across different age groups and income levels second we conduct a field experiment to measure their risk and time preferences specifically loss aversion and present bias we then explore the link between the measured preferences to overspending behavior the findings reveal an interesting link between loss aversion present bias and traveling expenditure patterns outbound tourists with high loss aversion and high present bias are more likely to overspend finally our study also highlights the role of group identity in de biasing specifically individuals are more likely to behave according to standard economic models when making decisions in groups

please or squeeze brand performance implications of constrained and unconstrained multi item promotions existing research on price promotions typically investigates the effects of single product promotions however brand managers often promote multiple items simultaneously to bolster the performance of a complete brand line this paper investigates the brand performance implications of such multi item promotions we distinguish between two types of multi item promotions traditional unconstrained multi item promotions that grant a discount irrespective of the size or composition of the purchase set and constrained multi item promotions that require consumers to purchase specific quantities self bundling or even predetermined combinations fixed bundling of promoted items using a normative consumer decision model the authors analyze the relative effectiveness of these promotions in terms of unit sales and revenue impact and show that promotion performance is moderated by consumers preference for variety the authors find that unconstrained multi item promotions outperform single item promotions especially in markets without variety seeking in markets with variety seeking unconstrained multi item promotions are not as effective in stealing extra sales from competition because consumers prefer to spread their purchases across all items including competitive ones however in those markets self bundling promotions are particularly effective because they force consumers to adopt larger amounts of the promoted items at the expense of competitors finally in neither type of market does fixed bundling substantially improve promotion performance

wage returns to ownership and fee responses to physician supply the labor and entrepreneurial components of reported physician net income are separated in an analysis of input and output market performance a wage equation corrected for selectivity bias is estimated for employee physicians and the results indicate that the performance of the labor market for primary care physicians is consistent with competitive theory the parameters are used to predict opportunity wage rates for self employed physicians differences between net income per hour and the predictions indicate that 16 percent of net income from practice is attributable to entrepreneurship evidence of negative selectivity into employee status is also found copyright 1990 by mit press

tourists spending and adherence to shopping plans the case of the christmas market in merano italy abstract the present paper investigates the determinants of tourists expenditure by categorizing tourists based on their mental budgets individuals can be divided into three categories based on the difference between their mental budget and actual expenditure underspenders on budget spenders and overspenders estimation of the empirical model is performed based on data collected through a survey of visitors to the christmas market in merano italy during advent in 2011 the estimation is performed with the heckman estimator ordered probit selection rule and linear regression we find that the spending patterns of visitors belonging to the three identified categories differ significantly analyzing visitors expenditure based on the proposed categorization allows us to identify category specific factors and develop management strategies for each category the managerial and theoretical implications of the results are discussed

a reference price theory of the endowment effect abstract the common finding that selling prices exceed buying prices the so called endowment effect is typically explained by the assumptions that consumers evaluate potential transactions with respect to their current holdings and that the owners of a good regard its potential loss to be more significant than nonowners regard its potential acquisition in contrast to this pain of losing account the authors propose that the endowment effect reflects a reluctance to trade on terms that appear unfavorable with respect to salient reference prices in six experiments and eight more summarized in appendixes the authors show that manipulations that reduce the gap between valuations and reference prices reduce or eliminate the endowment effect these results suggest that the endowment effect is often best construed as an aversion to bad deals rather than an aversion to losing possessions

on the psychology of loss aversion possession valence and reversals of the endowment effect loss aversion states that losses loom larger than gains we consider two types of loss aversion defined by two interpretations of loss a loss can be defined 1 in terms of valence or 2 in terms of possession correspondingly valence loss aversion vla entails greater sensitivity to negative vs positive changes and possession loss aversion pla entails greater sensitivity to items leaving vs entering one s possession both types of loss aversion imply an endowment effect for attractive items but pla implies a reversal of the endowment effect for unattractive items experimental results show endowment effect reversals consistent with pla

static modeling of dynamic recreation behavior implications for prediction and welfare estimation abstract this paper examines the consequences of using a static model of recreation trip taking behavior when the underlying decision problem is dynamic specifically we examine the implications for trip forecasting and welfare estimation using a panel dataset of lake michigan salmon anglers for the 1996 and 1997 fishing seasons we derive and estimate both a structural dynamic model using bellman s equation and a reduced form static model with trip probability expressions mimicking those of the dynamic model we illustrate an inherent identification problem in the reduced form model that creates biased welfare estimates and we discuss the general implications of this for the interpretation of preference parameters in static models we then use both models to simulate trip taking behavior and show that although their in sample trip forecasts are similar their welfare estimates and out of sample forecasts are quite different

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

decision making in electrical appliance use in the home this paper presents the results of a survey as well as an argument from the viewpoint of behavioral economics with the aim of clarifying how consumers make decisions about electrical appliance use in the home a survey of consumers showed that most have little awareness of the energy efficiency of appliances the price of the services produced by electrical appliances or electricity rates these findings indicate that price does not function as a signal in electricity consumption through electrical appliance use rather we found that consumer decision making in electricity consumption is dependent on the characteristics of the particular electrical appliances they use additionally we argue that the payment system for home electricity consumption plays an important role in decision making causing biases due to aspects of human psychology discussed here in terms of satisficing and heuristics payment decoupling and budgeting we conclude that decision making about electrical appliance use and electricity consumption in the home is not always rational and is affected both by the particular characteristics of appliances and the payment system for electricity consumption along with human psychology

the effect of payment schemes on inventory decisions the role of mental accounting does the payment scheme have an effect on inventory decisions in the newsvendor problem keeping the net profit structure constant we examine three payment schemes that can be interpreted as the newsvendor s order being financed by the newsvendor herself scheme o by the supplier through delayed order payment scheme s and by the customer through advanced revenue scheme c in a laboratory study we find that inventory quantities exhibit a consistent decreasing pattern in the order of schemes o s and c with the order quantities of scheme s being close to the expected profit maximizing solution these observations are inconsistent with the expected profit maximizing model contradict what a regular or hyperbolic time discounting model would predict and cannot be explained by the loss aversion model instead they are consistent with a model that underweights the order time payments which can be explained by the prospective accounting theory in the mental accounting literature a second study shows that the results hold even if all physical payments are conducted at the same time suggesting that the framing of the payment scheme is sufficient to induce the prospective accounting behavior we further validate the robustness of our model under different profit conditions our findings contribute to the understanding of the psychological processes involved in newsvendor decisions and have implications for supply chain financing and contract design this paper was accepted by christian terwiesch operations management

planned versus actual betting in sequential gambles abstract anecdotal evidence indicates that in a gambling environment consumers may end up betting more than they had initially planned the authors assess this phenomenon in a series of three experiments in which people are exposed to sequential and fair gambles in a two stage process planned and actual bets the results show that in the planning phase people behave conservatively betting on average less after an anticipated loss and the same amount after an anticipated gain however after experiencing an actual loss in the first gamble people bet in a subsequent gamble significantly more than they had initially planned whereas on average there were no observable differences from the plan after an actual gain the reason for such asymmetry is due in part to people s tendency to underestimate at the planning phase of the gamble the impact of negative emotions in betting decisions during the actual phase of the gamble

opportunity cost consideration normatively consumers should incorporate opportunity costs into every decision they make yet behavioral research suggests that consumers consider them rarely if at all this research addresses when consumers consider opportunity costs who considers opportunity costs which opportunity costs spontaneously spring to mind and what the consequences of considering opportunity costs are perceived constraints cue consumers to consider opportunity costs and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints the specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory for a given resource some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing but no less likely when opportunity costs are unappe

consumers price sensitivities across complementary categories in this paper we examine the pattern of correlation among consumer price sensitivities for customer purchase incidence decisions across complementary product categories we use a hierarchical bayesian multivariate probit model to uncover this pattern we estimated this model using purchase incidence data for six categories involving three pairs of complementary products our results show a new and interesting pattern of correlation among price parameters of complementary products for example we find that the correlation of own price sensitivities of complementary products is negative these results are consistent across the three complementary pairs of products we also investigate the reason for this counterintuitive result finally we present some managerial implications of our model we show how our model can be used for cross category targeting decisions by retailers we find that compared to nontargeted discounting the average profitability gain from customized discounting across the three category pairs is only 1 29 when complementarity is ignored but this gain improves to 8 26 when full complementarity is taken into account we also investigate whether ignoring the complex pattern of correlation has implications for managerial actions regarding targeting and optimal discounting we find that retailers can make misleading inferences about the impact of targeted discounts when they ignore cross category effects in modeling

choice simplification a theory of mental budgeting and naive diversification we develop a theory of how an agent makes basic multiproduct consumption decisions in the presence of taste consumption opportunity and price shocks that are costly to attend to we establish that the agent often simplifies her choices by restricting attention to a few important considerations which depend on the decision at hand and affect her consumption patterns in specific ways if the agent s problem is to choose the consumption levels of many goods with different degrees of substitutability then she may create mental budgets for more substitutable products e g entertainment in some situations it is optimal to specify budgets in terms of consumption quantities but when most products have an abundance of substitutes specifying budgets in terms of nominal spending tends to be optimal if the goods are complements in contrast then the agent may consistent with naive diversification choose a fixed unconsidered mix of products and if the agent s problem is to choose one of multiple products to fulfill a given consumption need e g for gasoline or a bed then it is often optimal for her to allocate a fixed sum for the need

the fewer the better number of goals and savings behavior abstract this article examines the effect of the number of goals on consumers savings behavior drawing from research on implementation intention the authors show that under certain conditions presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals multiple goals typically evoke trade offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind set and defer actions in contrast the authors propose and demonstrate that a single goal evokes a stronger implementation intention which in turn has a greater effect on behavior change they also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves theoretical and practical implications are discussed

quasi states dual regimes and neoclassical theory international jurisprudence and the third world decolonization in parts of the third world and particularly africa has resulted in the emergence of numerous quasi states which are independent largely by international courtesy they exist by virtue of an external right of self determination negative sovereignty without yet demonstrating much internal capacity for effective and civil government positive sovereignty they therefore disclose a new dual international civil regime in which two standards of statehood now coexist the traditional empirical standard of the north and a new juridical standard of the south the biases in the constitutive rules of the sovereignty game today and for the first time in modern international history arguably favor the weak if international theory is to account for this novel situation it must acknowledge the possibility that morality and legality can in certain circumstances be independent of power in international relations this suggests that contemporary international theory must accommodate not only machiavellian realism and the sociological discourse of power but also grotian rationalism and the jurisprudential idiom of law

the time vs money effect shifting product attitudes and decisions through personal connection the results of five field and laboratory experiments reveal a time versus money effect whereby activating time vs money leads to a favorable shift in product attitudes and decisions because time increases focus on product experience activating time vs money augments one s personal connection with the product thereby boosting attitudes and decisions however because money increases the focus on product possession the reverse effect can occur in cases where merely owning the product reflects the self i e for prestige possessions or for highly materialistic consumers the time versus money effect proves robust across implicit and explicit methods of construct activation

mental budgeting and consumer decisions consumers often set budgets for categories of expenses e g entertainment and track expenses against their budget because budgets cannot perfectly anticipate consumption opportunities people may earmark too much or too little money for a particular category this leads them to overconsume or underconsume goods in that category the results of three studies suggest that consumers do indeed set budgets and that budgeting may lead to underconsumption to show that consumers track expenses the studies demonstrate that budgeting effects are larger for purchases that are highly typical of their category such purchases reduce the amount people spend in a category and block the purchase of other typical items the studies control for satiation and income effects thus budgeting adds predictive power to standard economic consumer theory

money is no object testing the endowment effect in exchange goods abstract we present a new experimental design to test whether the endowment effect exists for exchange goods like money we compare three groups to a baseline one endowed with money one endowed with chocolate coins and one endowed with chocolate coins described as tokens we find an endowment effect for chocolate coins but no endowment effect for money or for chocolate coins when they are described as tokens the results suggest that the endowment effect does not exist for exchange goods

contraction with unpacking when unpacking leads to lower calorie budgets consumers set a lower consumption budget when they set individual calorie budgets for constituent categories e g breakfast lunch dinner and snacks categorical approach versus when they set a total budget overall approach this contraction effect of unpacking a judgment is driven by motivated reasoning consumers are motivated to reduce calorie consumption and this motive directs their cognitive elaboration for the budget decision to be on what to cut and how much to cut furthermore the categorical vs overall approach brings to mind more thoughts that are consistent with the motive to reduce consumption which then leads to a lower calorie budget consistent with this explanation the level of elaboration on reducing calorie intake especially on occasions where overconsumption is less salient mediates the contraction effect in addition the contraction effect is attenuated when the motive to reduce consumption is deactivated finally while the contraction effect occurs when consumers have a motive to reduce consumption the classic expansion effect of unpacking occurs when consumers are prompted to think about what to consume or are motivated to increase consumption the results for calorie budgeting are shown to have downstream consequences on actual food consumption

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

the moderating effect of relationship norm salience on consumers loss aversion people are said to be loss averse when their pain of losing something exceeds their joy of gaining it this research proposes and tests a new moderator of loss aversion the type of relationship norms salient at the time the loss or the gain is experienced we suggest that mere salience of the norms of a communal relationship based on concern for the partner relative to those of an exchange relationship based on quid pro quo leads to a greater degree of loss aversion a typical endowment effect study supports our overall thesis and shows that differences across relationship norms are stronger in selling prices willingness to accept than in buying prices willingness to pay

risk preferences and demand drivers of extended warranties we disentangle and study the relative importance of different risk preferences in explaining extended warranty purchases and the high premia paid for them empirical and behavioral research on insurance is at odds with whether diminishing returns curvature of the utility function or loss aversion and nonlinear probability weighting lead to observed consumer behavior this lack of consensus is primarily due to the inability of standard choice data to separate different risk preferences and the consequent need to rely on strong parametric assumptions we design two conjoint studies consistent with simultaneous and sequential decision making with choices about washing machines and extended warranties where subjects are given failure probabilities and repair costs using stated choice data from the surveys we can nonparametrically identify product and risk preferences we find that loss aversion is significantly more important than curvature and probability weights in explaining extended warranty choices importantly failure to decompose risk averse behavior into that arising from curvature loss aversion and probability weighting leads to lower washer prices and profits these findings are robust to alternate reference point assumptions we rationalize the premia paid for warranties by exploring retailer incentives to price discriminate and test the theory on complementary goods pricing finally based on counterfactual analysis forcing separate retailers to sell washers and extended warranties is not necessarily welfare enhancing as cited in the media and previous literature

the budget contraction effect how contracting budgets lead to less varied choice how do consumers adjust their spending when their budget changes a common view is that the allocation of one s current budget should not depend on previous budget allocations contrary to this the authors find that when the budget contracts to a particular level consumers select less variety as measured by the number of different items with some of the budget allocated to them than when their budget expands to that same level this budget contraction effect stems from a reduction in variety under the contracting budget not from variety expansion under the expanding budget evidence from five experiments indicates that the effect is driven by a desire to avoid feelings of loss associated with spreading allocation cuts relative to reference quantities from previous allocations across many items

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

mental accounting access motives and overinsurance people exercising mental accounting have an additional motive for buying insurance they perceive a risk of having insu cient funds available to self insure in this way insurance protects the consumption value of the insured asset beyond the expenditure to acquire replace it this complements previous approaches based on probability weighting and loss aversion to explain the high pro tability of warranties and an aversion toward deductibles it helps to account for why the value of a warranty is found to be positively related to the value of the product and why there is seemingly contradictory empirical evidence on how household income a ects demand for warranties the adapted model rationalizes a strong aversion to deductibles and explains the observed sensitivity of this aversion to the insurance context finally it predicts a strong impact of how an insurer pays out bene ts on the value and cost of insurance this can explain both the evidence on strong deductible aversion for ood insurance and the lack of such evidence for long term care insurance jel classi cation d11 d14 d81 g22

the endowment effect as self enhancement in response to threat the discrepancy between willingness to pay wtp and willingness to accept wta for a product referred to as the endowment effect has been investigated and replicated across various domains because of its implications for rational decision making the authors assume that implicit processes operate in the endowment effect and propose an explanation that is derived from the two main accounts of the effect ownership and loss aversion based on the implicit egotism and self affirmation literatures the model argues that selling is perceived as an implicit self threat and that sellers as a part of their automatic defense mechanism respond to this self threat by enhancing the value of the self associated object five studies test these conjectures and provide support for the proposed model

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

consumer choice strategies for comparing noncomparable alternatives research on consumer choice has focused on easily comparable alternatives a subset of the choices consumers regularly face this paper outlines the problem and two general strategies for comparing noncomparable alternatives a subset of choices that has been overlooked in the literature experiments are reported that support use of the strategies

multiple unit holdings yield attenuated endowment effects previous endowment effect experiments have examined circumstances in which people encounter a single unit of a good e g one chocolate we contrast single unit treatments with multiple unit treatments in which participants encounter several units of a good e g five chocolates we observe endowment effects of typical magnitude for singleton holdings but attenuated endowment effects for multiple unit holdings moreover endowment effects consistently arise for singletons even as the definition of a unit is altered for instance participants holding one piece of chocolate show an endowment effect of standard size but so do participants holding one box of chocolates yet the box contains about 20 individual pieces of chocolate and participants given that many separate pieces show a substantially attenuated endowment effect we thus propose the property of unit dependence the definition of a unit can change but contingent on any given definition a pronounced endowment effect may emerge for singletons but not multiples this paper was accepted by teck ho decision analysis

explaining the endowment effect through ownership the role of identity gender and self threat the price people are willing to pay for a good is often less than the price they are willing to accept to give up the same good a phenomenon called the endowment effect loss aversion has typically accounted for the endowment effect but an alternative explanation suggests that ownership creates an association between the item and the self and this possession self link increases the value of the good to test the ownership account this research examines three moderators that theory suggests should affect the possession self link and consequently the endowment effect self threat identity associations of a good and gender after a social self threat the endowment effect is strengthened for in group goods among both men and women but is eliminated for out group goods among men but not women these results are consistent with a possession self link explanation and therefore suggest that ownership offers a better explanation for the endowment effect

focusing on the forgone how value can appear so different to buyers and sellers we propose that buying and selling price estimates reflect a focus on what the consumer forgoes in the potential exchange and that this notion offers insight into the well known difference between those two types of value assessment buyers and sellers differ not simply in their valuation of the same item but also in how they assess the value buyers tend to focus on their sentiment toward what they forgo typically the expenditure and buying prices are thus heavily influenced by variables such as salient reference prices by the same token sellers tend to focus on their sentiment toward surrendering the item and selling prices are hence more heavily influenced by variables such as benefits of possessing the item four studies examining buying and selling price estimates of tickets for national collegiate athletic association basketball games offer consistent support for these ideas the studies show that naturally occurring differences among respondents in attitudes relating to the tickets that sellers forgo e g significance of the game corresponded more closely to variation in selling prices than in buying prices conversely measures relating to the expenditure e g respondents concern with money corresponded more closely to buying prices than to selling prices using controlled manipulations we then showed that changes in aspects relating to the game e g expected climate in the stadium affected selling prices more than buying prices but changes relating to the expenditure e g list price of the ticket influenced buying prices more than selling prices we also showed that drawing attention to the benefits of possessing a ticket before asking for the price estimates influenced buying prices more than selling prices supporting our claim that otherwise these benefits are naturally more salient to sellers than buyers similarly drawing attention to alternative uses of money before asking for price estimates influenced selling prices more than buying prices

economic rents derived from hospital privileges in the market for podiatric services abstract this study examines the relative impacts of human capital and market conditions on the economic rents associated with hospital privileges in the market for footcare an empirical model of hospital privileges for podiatrists is formulated based on the pauly redisch model of hospital behavior the privelege model is then incorporated into a model of podiatrists earnings via a selection adjustment as proposed by heckman and lee the results indicate the persistance of economic rents even after controlling for unobserved quality factors

anchoring effects on consumers willingness to pay and willingness to accept we examine the susceptibility of consumers willingness to pay wtp and willingness to accept wta judgments to influence by arbitrary anchors the results of four studies suggest that although circumstantial differences between buying and selling decisions can lead to systematic differences in susceptibility to anchoring effects the principles governing the impact of anchoring on wtp and wta judgments are essentially the same in particular robust anchoring effects are observed when the anchor relates to the focal source of uncertainty further wtp and wta judgments are most susceptible to anchoring and endowment effects under uncertainty about the desire to trade the implications of this research for our understanding of anchoring and endowment effects are discussed

the abolition of slavery and the end of international war slavery and war have both historically been considered inevitable consequences of human nature yet slavery has been abolished and moral progress may have contributed to slavery s disappearance both realists and marxists are skeptical about the impact of ethical constraints on political decisions while idealists as well as at least some regime analysts emphasize the role of those constraints however elements of all of these approaches support the proposition that moral progress may bring an end to international war some historical trends do not support the idea that international war is on the verge of disappearance but there has not been a war between major powers since 1945 in addition norms against colonialism are strong no war has occurred between democratic states nor does a war appear likely among the rather sizable number of industrialized democratic states in the international system today explanations of these pockets of peace based on caution induced by nuclear weapons or on economic interdependence for example are certainly not beyond question therefore it may be that norms inhibiting the initiation of international war have already made obsolete not only wars between the richest and most powerful states in the world but also some forms of depradation by the strong against the relatively weak states

the benefits of emergency reserves greater preference and persistence for goals that have slack with a cost abstractmarketers of programs that are designed to help consumers reach goals face dual challenges of making the program attractive enough to encourage consumer signup while still motivating consumers to reach desirable goals and thus stay satisfied with the program the authors offer a possible solution to this challenge the emergency reserve or slack with a cost they demonstrate how an explicitly defined emergency reserve not only is preferred over other options for goal related programs but can also lead to increased persistence study 1 demonstrates that consumers prefer programs with emergency reserves to programs that do not have them and study 2 further clarifies that consumers preference for an emergency reserve depends on the presence of a superordinate goal study 3 reveals that consumers prefer goals with emergency reserves because they perceive them to have both higher attainability and value than other goals study 4 demonstrates that reserves can lead to increased goal persistence in a

consumer choice between hedonic and utilitarian goods abstract in this article the authors examine how consumer choice between hedonic and utilitarian goods is influenced by the nature of the decision task building on research on elaboration the authors propose that the relative salience of hedonic dimensions is greater when consumers decide which of several items to give up forfeiture choices than when they decide which item to acquire acquisition choices the resulting hypothesis that a hedonic item is relatively preferred over the same utilitarian item in forfeiture choices than in acquisition choices was supported in two choice experiments in a subsequent experiment these findings were extended to hypothetical choices in which the acquisition and forfeiture conditions were created by manipulating initial attribute level reference states instead of ownership finally consistent with the experimental findings a field survey showed that relative to market prices owners of relatively hedonic cars value their vehicles more than do owners of relat

a model of mental accounting and reference price adaptation consumers possess a mental account that stores the worth of items purchased and yet to be consumed reference prices act as the book values of these items movements in the account the comparison between the reference price and the price paid at entry and the comparison between the benefit of consumption and the reference price at exit yield hedonic benefits the reference price is determined by a psychological process of adaptation to the price evoked by the trade the model is integrative in that it explains a wide array of observed anomalies such as sunk cost effects payment depreciation reluctance to trade preference for prepayment and the flat rate bias the model also generates new testable implications this paper was accepted by james smith decision analysis