Buying and selling exchange goods: Loss aversion and the endowment effect
Journal of Economic Psychology , Volume 17 - Issue 4 p. 517- 524
An experimental market was used to investigate whether exchange goods may be susceptible to the endowment effect. Previous research (Kahneman et al., 1990) suggested that the endowment effect will not be observed in exchange goods. The present study demonstrates that it may be observed, but only when traders are uncertain about future exchange prices. It is argued that this is a manifestation of loss aversion due to the difficulty of computing the net gains and losses of trade when exchange rates are uncertain.
|ERIM Article Series (EAS)|
|Journal of Economic Psychology|
|Organisation||Erasmus Research Institute of Management|
van Dijk, E, & van Knippenberg, D.L. (1996). Buying and selling exchange goods: Loss aversion and the endowment effect. Journal of Economic Psychology, 17(4), 517–524. doi:10.1016/0167-4870(96)00017-7