The Effect Of Emotion And Memory Retrieval Aspects On Endowment Effect

Endowment effect is an important psychological phenomenon of decision-making psychology and behavioral finance. It represents a severe challenge to views of the"rational"decision maker—assumed by traditional economics. The traditional economic theory argued that there was no distinguish to which one willing to pay the price for a commodity and one willing to want the compensation to the same commodity. In other words, the selling or buying condition could not affect oneself appraised to the commodity value. But endowment effect denied this viewpoint. The endowment effect is caused by the difference of the ownership for seller and chooser. Most researchers thought that this phenomenon can be explained by using"loss aversion". There were some researchers who studied from the view for the emotion and the self-respect. This research elaborates the endowment effect from the emotion and the memory retrieval aspects.Experiment 1 inspects that the memory retrieval aspects affect the endowment effect. The result indicated that the endowment effect is caused by retrieving different memory aspects from different endowment state. The experiment result indicated that the memory retrieval aspects could forecast the price. That is, the effects of value-increasing and value-decreasing aspects on price are positive and negative respectively. The seller retrieves more value-increasing aspects which cause higher valuation. The chooser retrieves more value-decreasing aspects which cause lower valuation. This phenomenon is called endowment effect.Experiment 2 inspects that the emotion and the memory retrieval aspects affect the endowment effect. The result indicated that the endowment effect is caused by retrieving different memory aspects from different emotion state. The experiment result indicated that seller retrieves more value-increasing aspects than value-decreasing aspects in positive emotion. Chooser retrieves more value-decreasing aspects than value-increasing aspects in positive emotion. Because the effects of value-increasing and value-decreasing aspects on price are positive and negative respectively, seller's valuation is higher than chooser's valuation. That is so called endowment effect. In negative emotion condition, the memory retrieval aspects are not affected by endowment condition. So the seller's valuation is similar to the chooser's valuation, which endowment effect disappears.In brief, this research result has indicated that the emotion and the memory retrieval aspects affect the endowment effect. The emotion affects the endowment effect through the memory retrieval aspects.