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The influence of involvement on the endowment effect: The moveable value function
Author(s) -
Saqib Najam U.,
Frohlich Norman,
Bruning Edward
Publication year - 2010
Publication title -
journal of consumer psychology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.433
H-Index - 110
eISSN - 1532-7663
pISSN - 1057-7408
DOI - 10.1016/j.jcps.2010.06.019
Subject(s) - endowment effect , loss aversion , moderation , psychology , value (mathematics) , context (archaeology) , endowment , function (biology) , economics , negativity effect , prospect theory , arousal , risk seeking , microeconomics , social psychology , paleontology , philosophy , epistemology , evolutionary biology , biology , machine learning , computer science
The endowment effect is based on the loss aversion built into Prospect Theory's asymmetric value function. This paper posits that the level of consumer involvement with a decision is a moderator of the endowment effect. It is proposed that high involvement increases the slope differential between the loss and gain regions of the value function, enhancing loss aversion. The research further posits that higher involvement is accompanied by higher arousal and cognitive processing which produces stronger negativity in thoughts. The argument for these effects is discussed in the context of evolutionary theory. We conclude that consumers are more loss averse in high versus low involvement conditions.