Download pdf
The Application of Endowment Effect on Marketing Strategies
- 1 Keystone Academy No.11
* Author to whom correspondence should be addressed.
Abstract
In this paper, we provide a comprehensive review and analysis of the endowment effect through aspects. The endowment effect is one of the most famous findings in behavioral economics and has been used as a reference for evidence of dependent preference and loss aversion theories [1]. The endowment effect was first explained and proved in three aspects, loss aversion, psychological inertia, and psychological ownership. In addition, by analyzing the retailing techniques of Starbucks Corporation's stores showing the psychological ownership and endowment effect. The application value of the endowment effect is also demonstrated. Meanwhile, the free test drive mentioned in the marketing report of Tesla proves the application of the endowment effect of loss aversion to the automobile industry. The two examples illustrate that the endowment effect is widely present in daily transactions and consumption behavior, and therefore the study of the endowment effect is essential to improve economic efficiency and help make economic decisions from a microeconomic perspective.
Keywords
endowment effect, marketing strategy, starbucks, Tesla
[1]. Morewedge, C. K., & Giblin, C. E. Explanations of the endowment effect: an integrative review. Trends in cognitive sciences, 19(6), 339-348 (2015).
[2]. Marzilli Ericson, K. M., & Fuster, A. The endowment effect. Annu. Rev. Econ., 6(1), 555-579 (2014).
[3]. Kahneman, D., Knetsch, J. L., & Thaler, R. H. Experimental tests of the endowment effect and the Coase theorem. Journal of political Economy, 98(6), 1325-1348 (1990).
[4]. Beggan, J. K. On the social nature of nonsocial perception: The mere ownership effect. Journal of personality and social psychology, 62(2), 229 (1992).
[5]. Haskova, K. Starbucks marketing analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 1, 11-29 (2015).
[6]. Mangram, M. E. The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), 289-312 (2012).
[7]. Brown, T. C. Loss aversion without the endowment effect, and other explanations for the WTA–WTP disparity. Journal of Economic Behavior & Organization, 57(3), 367-379 (2005).
[8]. Kahneman, D., Knetsch, J. L., & Thaler, R. H. Experimental tests of the endowment effect and the Coase theorem. Journal of political Economy, 98(6), 1325-1348 (1990).
[9]. Knetsch, J. L. The endowment effect and evidence of nonreversible indifference curves. The american Economic review, 79(5), 1277-1284 (1989).
[10]. Beggan, J. K. On the social nature of nonsocial perception: The mere ownership effect. Journal of personality and social psychology, 62(2), 229 (1992).
[11]. Köbberling, V., & Wakker, P. P. An index of loss aversion. Journal of Economic Theory, 122(1), 119-131 (2005).
[12]. Gal, D. A psychological law of inertia and the illusion of loss aversion (2006).
[13]. Dawkins, S., Tian, A. W., Newman, A., & Martin, A. Psychological ownership: A review and research agenda. Journal of Organizational Behavior, 38(2), 163-183 (2017).
[14]. Jussila, I., Tarkiainen, A., Sarstedt, M., & Hair, J. F. Individual psychological ownership: Concepts, evidence, and implications for research in marketing. Journal of Marketing Theory and Practice, 23(2), 121-139 (2015).
[15]. Haskova, K. Starbucks marketing analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 1, 11-29 (2015).
[16]. Talonen, A., Jussila, I., Saarijärvi, H., & Rintamäki, T. Consumer cooperatives: Uncovering the value potential of customer (2016).
[17]. Mangram, M. E. The globalization of Tesla Motors: a strategic marketing plan analysis. Journal of Strategic Marketing, 20(4), 289-312 (2012).
[18]. Peck, J., & Shu, S. B. The effect of mere touch on perceived ownership. Journal of consumer Research, 36(3), 434-447 (2009).
[19]. Strahilevitz, M. A., & Loewenstein, G. The effect of ownership history on the valuation of objects. Journal of consumer research, 25(3), 276-289 (1998).
[20]. Shu, S. B., & Peck, J. Psychological ownership and affective reaction: Emotional attachment process variables and the endowment effect. Journal of Consumer Psychology, 21(4), 439-452 (2011).
[21]. Brown, T. C. Loss aversion without the endowment effect, and other explanations for the WTA–WTP disparity. Journal of Economic Behavior & Organization, 57(3), 367-379 (2005).
[22]. Irmak, C., Wakslak, C. J., & Trope, Y. Selling the forest, buying the trees: The effect of construal level on seller-buyer price discrepancy. Journal of Consumer Research, 40(2), 284-297 (2013).
Cite this article
Yan,X. (2023). The Application of Endowment Effect on Marketing Strategies. Advances in Economics, Management and Political Sciences,12,320-325.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).