The role of emotions in the endowment effect

This paper argues that the endowment effect – the tendency for minimum selling price to exceed maximum buying price for a particular object – might be minimized when a negative emotion is induced. The findings from two experiments on 400 participants support this hypothesis: the endowment effect only occurs when participants are induced to feel happy, and is absent when people are induced to feel sadness. Thus, the importance of emotional states is highlighted.