Egocentric Empathy Gaps between Owners and Buyers: Misperceptions of the Endowment Effect

Abstract

In 5 studies, the authors examined people's perceptions of the endowment effect, or the tendency to value an object more once one owns it. In the 1st 2 studies, the authors documented egocentric empathy gaps between owners and buyers regarding the endowment effect: Both owners and buyers overestimated the similarity between their own valuation of a commodity and the valuation of people in the other role. The next 2 studies showed that these empathy gaps may lead to reduced earnings in a marker setting The final study showed the egocentric empathy gaps stem partly from people's misprediction of what their own valuation would be if they were in the other role.