The Endowment Effect From A Perspective Of Psychological Distance

Endowment effect, which refers to the phenomenon that the price given by people who own the product is much higher than that of the people who do not. own, is ubiquitous in daily life, and the prominent explanation is loss aversion in Prospect Theory. In recent years, researchers have found that many conclusions in self-decision can not apply to decision for others. Here, based on Construal Level Theory (CLT), we first focus on the effect of social distance on endowment effect, and we introduce the history, the existing research, influence factors and related explanation theories about self-other decision in details. Then we extend our results in temporal distance, and finally, the relation between psychological distance and loss aversion is explored.In Experiment la, we reanalyze the data of a foreign research, and confirmed our hypothesis that endowment effect will disappear when deciding for others, while when the decision is made for the self, the endowment effect still exists. Experiment 1b reconfirm the findings of Experiment la by collecting data at Nanjing University of China. Experiment lc found that situational factor moderate the effect of psychological distance on endowment effect.Experiment 2 found that when people make decisions for the current time, the endowment effect exists, while when people make decisions for a remote future, the endowment effect would disappear.Experiment 3 explored the relationship between psychological distance and loss aversion and fond that they were negatively related to each other, which means the more remote the psychological distance is, the less the loss aversion is.The implications of this research shows in many ways. Fist, our research confirmed the endowment effect under Chinese culture, and this supported the consistency of self-other decision research. Meanwhile, we not only tested our hypothesis under social distance, but also under temporal distance, and this strongly supported the psychological distance hypothesis. Besides, we also identified the relationship between psychological distance and loss aversion. As for the application, the result of this research indicated that the agency economics may play an important role in solving the endowment effect in second-hand market, and also improve our decision by deciding for the future. However, the effect of psychological on decision and judgment varies according to the situation of the task.Finally, we discussed short comings of our research, and also, we made some suggestions for future research.