The Endowment Effect and "Self" in Children

Lead Research Organisation: University of Bristol
Department Name: Experimental Psychology


Object ownership and possessions are a peculiar, if not unique, human preoccupation. No other animal exhibits the same degree of interest and valuation of objects that have no intrinsic value. This supports various accounts (mostly notably William James's 1890) that humans use possessions to signal one's status.

Once objects come into our possession, they are valued more in trading situations than others are willing to trade for them in a bias known as the "endowment effect." Although there have been economic models of this bias (most notably 2002 Nobel prize winner, Daniel Kahneman's), a social psychological account based on the self-concept has been gaining popularity. Belk's (1988) "extended self" hypothesis argues that we use possessions to signal to others our values and self worth as defined by cultural conventions. This account is not incompatible with Kahneman's loss aversion hypothesis but it does explain better why the endowment effect is not universal and is modifiable when different cultural self norms are primed.

To date, human studies of the endowment effect have been almost entirely with adult populations though there are good theoretical reasons to study the emergence of the behaviour in younger children, especially as conceptions of self start to emerge in preschoolers and may become shaped by culture over middle childhood. There have also been remarkably few studies that report manipulating the self concept in preschoolers.

In the current proposal we seek to investigate and integrate these two streams of research during this early period of emerging self and object valuation. First we seek to fill a missing gap in the literature on the endowment effect by establishing the emergence of the bias in young children. Second, we will manipulate factors that have been shown to strengthen the endowment effect in adults namely, length of possession and the investment of labour. Finally, we will manipulate children's explicit and implicit self-concept using interviews and collaborative tasks respectively to determine whether there is a corresponding shift in the endowment effect.

Planned Impact

As every parent knows, the early years are a key stage for social development. There are literally hundreds of parenting books that offer advice about how best to navigate this difficult and often distraught period that begins with the "terrible two's." At this age children are still learning how to integrate with other children and sharing objects and toys is one of the most important skills they must learn. Our research promises to shine a new experimental light on this period by examining the importance of object possession and concepts of self.

We believe that the human obsession with possessions is largely a reflection of self concepts where objects signal status. This process begins early in development and many of the playroom battles are fought over sharing possessions. We do not believe that we will (or even whether we should) change how these dispute unfold, but we believe that we may be able to provide the evidence to explain the common wisdom that cooperative activities make children more prosocial.

This will be of interest to parents and playschool teachers but may also filter into other bodies, such as local authorities, that recognise the importance of the early social environment on long term development. We seek to broadcast our findings to the largest audience possible using all forms of available media.
Description 1) The endowment effect in children is most likely to be a reflection of the extent to which they regard possessions as an extension of their "self" concept.

Significance: The endowment effect is one of the most studied phenomenon in behavioural economics and refers to the bias to over-value possessions relative to those belonging to others or the value that others would be prepared to pay to purchase them. Since its discovery in the 1980's, the endowment effect has formed a core component of Kahneman's prospect theory (for which he was awarded the Nobel Prize) which states that, psychologically, the prospect of a loss outweighs the prospect of a gain which is why the owner's asking price is always higher than what others are prepared to pay. Although the endowment effect has been reported in different cultures as well as non-human primates, it does not normally appear in children until 6 years of age even though we know that child value personal possessions. Our research reveals TWO important discoveries 1) younger children (3-4 years) will evidence the endowment effect if 2) they are primed to think about themselves.
These findings support alternative accounts for the endowment effect as a reflection of the "extended self" concept. In short, our self-concept includes everything that we can claim ownership over and that we are focused on our self as opposed to thinking about others, we correspondingly place greater value on personal possessions. This interpretation is consistent with the cultural variation found with the endowment effect in that it is much stronger in Western cultures that emphasize the importance of the individual compared to interdependent cultures that emphasize our self in relation to others.

Key Applications: This finding is not only relevant to revising influential models of economics but it does have practical implications for the way that we value possessions. For example, people are reluctant to discard items and tend to accumulate vast amounts of personal possessions. This is often interpreted as frugal activity but an "extended self" perspective reveals that the motivating factor is more to do with loss of identity. This has major implications for changing consumer behaviour but also for developing interventions for individuals who have developed pathological hoarding. The findings should also inform early years education practitioner about the importance of recognizing the role of self-construal given that over 80% of conflicts in nurseries are about ownership.

Outputs: This work was presented as posters at Budapest CEU Conference on Cognitive Development and at the British Psychological Society: Developmental Section in 2015. This work has also been published in a peer-reviewed journal:

Hood, B., Weltzien, S., Marsh, L. & Kanngiesser, P. (2016). Picture yourself: Self-focus and the endowment effect in preschool children. Cognition, 152, 70-77.

2) The IKEA effect can be induced in young children and is not dependent on ownership nor effort.

Significance: The IKEA effect (after the self-assembly retailer) refers to the bias to over-value possessions that one has constructed relative to those made by others. A number of alternative accounts could explain this bias including the endowment effect (ownership) and/or effort justification (the amount of effort expended). Over three sets of studies, we tested these alternative accounts in children ranging in age from 3 - 6 years. To test for the IKEA effect, we had children assemble simple foam creatures and then give a measure of how much they liked them using a preference scale. Several important patterns were detected. First, we demonstrated an IKEA effect in children aged 5-to-6-years who made their creatures, but not in children aged 3-to-4-years. This is the age when the endowment effect typically emerges and lends support to the role of the emerging self-concept. Simply interacting with the creatures by holding it or using it did not lead to increased valuation. Second, the amount of effort did not produce an increased valuation - children either finished partially completed creatures or made them from scratch. This suggests that the IKEA is not dependent on effort. Finally, children valued creatures that they made but did not end up owning. Like the worker in the car factory who takes pride in their efforts, ownership was not a necessary condition for increased valuation. From this series of studies, we concluded that the IKEA effect emerges between the ages of 4- and 5- years. It is not driven by effort justification nor ownership accounts. Instead it seems that self-extension into created objects drives an increase in product valuation.

Key Applications: Again, these findings should inform early years education practitioners about the importance of recognizing the role of self-construal and evaluating the importance of contributing to projects when it comes to attitudes about collaborative efforts

Outputs: This work was presented at the Budapest CEU Conference on Cognitive Development in 2016 and as part of a symposium at Society for Research in Child Development in Texas, US in 2017. This work has also been published in a peer-reviewed journal:

Marsh, L.E. & Kanngiesser, P. & Hood, B. (2017). When and how does labour lead to love? The ontogeny and mechanisms of the IKEA effect. Cognition, 170, 245-253.

3) Altruistic behaviours are modulated by self-focus

Significance: One of the objectives of the grant was to test for independent versus interdependence construal in cooperative versus independent activity. We decided to extend this question in to the realms of sharing and helping others. We embarked on an ambitious programme of cross-cultural research with children aged 6-8 years from the UK and India. First we found that priming children in the UK to think about themselves reduced the amounts of sharing and helping compared to priming them to think about others. This work has also been published in a peer-reviewed journal:

Weltzien, S., Marsh, L.E. & Hood, B. (2018). Thinking of me: Self-focus reduces sharing and helping in seven- to eight-year-olds. PLoS ONE 13: e0189752. pone.0189752.

When then tested sharing behaviour in British and Indian children in a game where they make an anonymous donation. Priming independence reduced generosity in all children whereas interdependence priming induced by thinking about others only had an effect in the Indian children who live in traditional extended families. This is a potentially exciting finding as it indicates the importance of external cultural and societal influences on altruism.

This work is currently under review:
Weltzien, S., Marsh, L.E., Kanngiesser, P., Stuijfzandd, B. & Hood, B. (under review) Considering self or others across two cultural contexts: how children's prosocial behaviour is affected by self-construal manipulations.
Exploitation Route We have another grant under review and plan to continue developing this line of work
Sectors Education,Government, Democracy and Justice

Description This work has been presented in many talks given to non-academic audiences
First Year Of Impact 2016
Sector Education
Description Collaboration with Dr Pat Kanngieser Berlin University 
Organisation Free University of Berlin
Country Germany 
Sector Academic/University 
PI Contribution Dr Kanngieser is a former graduate student of Prof Hood and was an integral advisor on many of the studies in this grant as recognized by the co-authorship on papers. Specifically, she was instrumental in setting up the field testing in Pune, India by allowing us access to her local assistant and school contacts
Collaborator Contribution We provided research assistance in collecting dATA
Impact Weltzien, S., Marsh, L., Kanngiesser, P., Stuijfzand, R. & Hood, B. (under review). Consider yourself: self-construal manipulation and sharing behaviour in British and Indian 7-and-8-year-olds. Kanngiesser, P., Itakura, S. & Hood, B.M. (2014). The effect of labour across cultures: developmental evidence from Japan and the UK. British Journal of Developmental Psychology, 32, 320-329. DOI: 10.1111/bjdp.12043 Marsh, L., Kanngiesser, P., & Hood, B. (2017). When does labour lead to love? The ontogeny of the IKEA effect. Cognition, 170, 245-253.
Start Year 2014