The Cognitive And Neural Mechanism Of The Extensibility Of The Endowment Effect

Indeed, people always place greater value on items that one owns, which is referred to as the endowment effect. It is similar to that all his geese are swans. Endowment effect postulates that there is a robust gap between the seller’s willingness to accept (WTA) and the buyer’s willingness to pay (WTP), which WTA always significantly exceeds WTP. The most accepted theoretical explanations for the endowment effect are loss aversion and mere ownership effect. Loss aversion is that the pain of giving up an endowment will exceed the pleasure of acquiring it (Knetsch&Sinden,1984; Kahneman, Knetsch,&Thaler,1991). However, a large body of evidence suggests that the endowment effect may actually be a type of self-referent cognitive bias due to mere ownership of an object. Individual always value possessions which are related to self more positively. When an item became "mine" which it would be viewed as part of self (Belk,1988), people evaluated their possessions more favorably (Beggan,1992). In the Chinese interdependent culture, they privileged the interdependent self which emphasized fundamental connectedness of individuals to each other and attending to others (Markus&Kitayama,1991). So in the culture of China, is there a robust extensibility of the endowment effect to close others’goods, such as mother’s goods, based on that the mere ownership effect is related to self? Accordingly, the extensibility of the endowment effect means that the effect could extend from self to close others. Recently, large bodies of behavioral studies investigated the mechanism and factors of the endowment effect. However, there are no studies that examine the extensibility of the endowment effect. This is an interesting phenomenon in the culture of China and is worthy to investigate. Thus, in present study, we used behavioral experiment and functional magnetic resonance imaging (fMRI) to explore the cognitive and neural mechanism of the extensibility of the endowment effect. Based on the mere ownership effect, we investigated the extensibility of the endowment effect by using the revised trade-in experiment. Thus, the present research examined two problems:(1) the cognitive mechanisms of the extensibility of the endowment effect;(2) the neural mechanism of the extensibility of the endowment effect. The study conducted two experiments and the results were as follows.In the first behavioral study, we chose four ownerships (mother ownership; lover ownership; good friend ownership; acquaintance ownership) as references to investigate whether there was extensibility of the endowment effect in the trade-in experiment. The first three ownerships (mother/lover/friend) were close to self and the last one (acquaintance) was not close to self. Then, we examined the relationship between individuals and mothers/lovers/close friends/acquaintances by using an Inclusion of Others in Self scale (IOS). The study showed that WTA was significantly higher than WTP as to mother’s, lover’s, good friend’s goods but there was no difference between WTA and WTP as to acquaintance’s goods. Thus, endowment effect could extend to the goods that their mothers, lovers and close friends owned. More importantly, closeness between individuals and mothers/lovers/friends/acquaintances mediated the relationship between the effect of ownership and the intensity of the endowment effect. Therefore, current findings demonstrate that extensibility of the endowment effect may come out by enhancing the function of the self.Using functional magnetic resonance imaging (fMRI), we developed a modified paradigm based on Savings Hold Or Purchases (SHOP) task (B. Knutson et al.,2008) to address the question that whether the activities of some brain regions could be used to predict the extensibility of the endowment effect. In the experiment, subjects were asked to buy and sell certain products at different18prices with the goods owned by themselves or by their mothers. Behaviorally, our data showed that the endowment effect existed for self and extended to mother. Analysis of neuroimaging data revealed two main findings. Firstly, subjects showed significantly positive activation in the MPFC and insula in SS vs. MS conditions. Interestingly, activations in the MPFC were correlated positively with indifference point both in SS and MS conditions. This suggested that activation of MPFC could predict behavioral indifference point when selling the goods their owned or mother owned. And, psychophysiological interaction (PPI) results indicated that the activation in the MPFC was accompanied by increased functional integration with insula and striatum. The extensibility of the endowment effect was based on the process that the striatum gave mother’s goods larger value so that people were affected by the pain of giving up possessions that mothers owned via the MPFC that represented both self and mother. Thus, these findings indicated that MPFC that represent self could play a key role in the extensibility of the endowment effect and further proved that the extensibility of the endowment effect may come out by enhancing the function of the self.Collectively, the results showed that:(1) the extensibility of the endowment effect existed in the ones that are close to self (mother/lover/close friend). More importantly, the degree of closeness between individual and mother/lover/close friend/acquaintance as a mediator influenced the intensity of the endowment effect;(2) the MPFC played an important role in the extensibility of the endowment effect and predict behavioral choices. Thus, the extensibility of the endowment effect may come out by enhancing the function of the self. In the present study, we offered a unique perspective on the endowment effect, and an interesting combination of two lines of research (self and referential processing and the endowment effect) and we believed that our research could contribute to advancement in the understanding of the endowment effect.