An investigation of the endowment effect using a factorial design

The endowment effect is interpreted as evidence that we may ‘over value’ objects we already own. In this study we introduce a novel approach to investigating the endowment effect, the factorial survey design, which enables manipulation of variables potentially influencing the endowment effect. We consider the value and uniqueness of the possession, whether it is a gift from a close friend and whether the trade is with a stranger. We find a higher endowment effect for possessions received as gifts from a close friend and this effect is entirely due to responses from women. Furthermore, we find significantly higher endowment effects for valuable possessions. Our results suggest there is ample scope for broadening the range of methods applied to this area of economic research.

► A factorial survey is used to investigate the endowment effect.
► Possessions from a close relational source have a higher endowment effect.
► The relational source effect is associated with gendered patterns of responses.