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Testing the Endowment Effect

Testing the Endowment Effect

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Science Fair Project Description

The endowment affect is a phenomenon which states that people will value an item more if they have ownership of it. In this experiment, you will be testing the endowment affect as it relates to assessing the value of an item. Two groups of participants will appraise the value of an item. The participants of one group will own the item, while the participants of the other group will be loaned a similar item. Will the two groups assess the items differently?
Complexity level:4
Time required:Required time is based on consideration for time needed to find participants and obtain materials.
Safety concerns:

Overview

Developed by the economist Richard Thaler, the endowment effect (also known as divestiture aversion) states that a person will value a possession more if they own it. They will do more to avoid losing the possession than they would to gain it. Additionally, they will often perceive their possessions as being of greater worth than an equivalent possession that they do not own. The endowment effect has been studied for its impact on economic theory.

Scientific Terms

Endowment effect

Materials

  • Participants (a minimum of 8)
  • Items for each participant (Inexpensive items will work fine. What is important is that all items are the same. In the experimental procedure, mugs of the same shape and size are used (with different designs/colors on each).
  • Data sheet

Procedure

  • Divide the participants into two groups: Group A and Group B.
     
  • Gather the participants of Group A and do the following:
    1. Advise them they are going to be part of an experiment.
    2. Give each participant a mug, telling them that they can use the mug during the course of the experiment, and to return the mugs at the end of the exercise.
    3. Ask them to assess the value of the mug.
    4. Record each participant?s response in the data sheet.
       
  • For Group B, do the following:
    1. Advise them they are going to be part of an experiment.
    2. Give each participant a mug, telling them that this mug is a gift to them for their participation in the experiment.
    3. Ask them to assess the value of the mug.
    4. Record each participant?s response in the data sheet.

Group A

Assessed Value

Participant 1

  

Participant 2

  

Participant 3

  

Participant 4

  

Participant 5

  

Participant 6

  

Participant 7

  

Participant 8

  

Participant 9

  

Participant 10

  
   

Group B

  

Participant 1

  

Participant 2

  

Participant 3

  

Participant 4

  

Participant 5

  

Participant 6

  

Participant 7

  

Participant 8

  

Participant 9

  

Participant 10

  

 

References

"What is the endowment effect?" on the Wise Geek web site http://www.wisegeek.com/what-is-the-endowment-effect.htm

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