"Acceptance and the Endowment Effect: Rationalizing What We Own," by Kurt Munz.
2026 Bocconi Junior Reserach Grant
The endowment effect is the tendency for an owner (potential seller) to value a good more than a nonowner (potential buyer). It influences consumer behavior, pricing, and decision-making in markets and everyday life. Scholars have proposed many explanations for the effect, including loss aversion, cognitive processing differences between owners and nonowners, incorporating owned objects into the sense of self, and market dynamics. Here, a new explanation is advanced that conceptualizes the endowment effect as a form of rationalization similar to how people rationalize the choices they make. After choosing, people feel dissonance about their selection’s downsides. So, they downplay those flaws and see the outcome more positively. Recent research suggests that this process does not actually require a person to actively choose, but merely to accept the outcome. The current research explores the possibility that this process of rationalization rooted in dissonance reduction could also contribute to the endowment effect. Specifically, owners rationalize their possessions, enhancing their perceived value, a process that does not occur among nonowners. The article reviews the literature from this perspective and experimentally tests derived predictions.