Bühren and Pleßner (2014) on “The Trophy Effect”

Christoph Bühren and Marco Pleßner, “The Trophy Effect.” Journal of Behavioral Decision Making 27: 363-377, 2014 [pre-publication version pdf here].

• For everyday (convenience) goods, the endowment effect is reflected in about a 2-to-1 ratio of willingness-to-accept (payment to relinquish a good) to willingness-to-pay (to acquire the good). But for environmental goods or tickets to a basketball game, the ratio could be much higher. The gap is smaller when folks are in a good mood and larger when folks are in a bad mood, though sadness (as opposed to a bad mood) tends to reduce the gap. 

• The authors conduct a series of experiments involving endowing half of the subjects with a pen, under four treatment conditions. All the subjects know that the pen, though a nice one, could be purchased at a nearby shop for 2.10 euro. 

• In the Baseline treatment, half the subjects are given pens, then, willingness-to-accept (wta) and willingness-to-pay (wtp) are assessed. In the Trophy treatment, there is a 15-minute math quiz. Those who score above the median receive a pen, and become potential sellers in the exchange game to follow. 

• In the Work treatment, sellers are chosen randomly, but then they must take the math quiz before being given their pen. (They worked for their pen, they are told, though their performance on the quiz is immaterial.) In the Lottery treatment, everyone is informed that there is a lottery for pens, and the half who win the lottery are given pens. 

• The baseline treatment results in the usual (but weird!) endowment effect, with wta about twice as high as wtp. The Lottery treatment results in a slightly higher, but statistically equivalent, ratio. (Losers in the lottery don’t have a wtp that is lower than in the baseline treatment.) The Work treatment gives similar results, though the average wta (for those diligent workers!) is enhanced. 

• The broader “winning” condition (Trophy plus Lottery Treatments) yields a higher wta (compared to the other two treatments). The broader “work” condition (Trophy plus Work) yields a jump in wta, too. The Trophy treatment has a huge impact on wta, which went to 4.40 euro – and also dropped wtp from 1 euro to .5 euro; the wta/wtp ratio assessed at the medians is 9.6! It looks like the work element (taking the test) is slightly more important than the winning element in driving the trophy effect. And math quiz “losers” don’t like having the pen around to remind them of their failure. 

• The authors replicate a standard finding, that people do not anticipate the endowment effect. In the Work condition, they expect their wta to be less than 2 euro, but it is over 3.5 euro after the 15-minute quiz. 

• In one study, participants are asked how likely they think it is that their math test had been mis-graded. Trophy winners seem to decrease their wta when doubt of their deserving creeps into their mind. In yet another study, there’s (1) a two-hour delay or (2) a one-week delay before the wta and wtp valuations are assessed. With a one-week delay, we are back at the baseline endowment effect: the trophy effect evaporates. And the two-hour delay is statistically equivalent to the one-week delay.

Shakespeare on the Trophy Effect, or the Endowment Effect, or Hot States and Cold States

They are both in either's powers; but this swift business

I must uneasy make, lest too light winning

Make the prize light.

(The Tempest, Act 1, Scene 2, Lines 628-630)

* * * * * * * * * * * * * * * * * * * ** * * * * * * * * * *

Yet hold I off. Women are angels, wooing:

Things won are done; joy's soul lies in the doing.

That she beloved knows nought that knows not this:

Men prize the thing ungain'd more than it is:

That she was never yet that ever knew

Love got so sweet as when desire did sue.

Therefore this maxim out of love I teach:

Achievement is command; ungain'd, beseech:

Then though my heart's content firm love doth bear,

Nothing of that shall from mine eyes appear.

(Troilous and Cressida, Act 1, Scene 2, Lines 438-447)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

…but go with speed

To some forlorn and naked hermitage,

Remote from all the pleasures of the world;

There stay until the twelve celestial signs

Have brought about the annual reckoning.

If this austere insociable life

Change not your offer made in heat of blood;

If frosts and fasts, hard lodging and thin weeds

Nip not the gaudy blossoms of your love,

But that it bear this trial and last love;

Then, at the expiration of the year,

Come challenge me, challenge me by these deserts,

And, by this virgin palm now kissing thine

I will be thine…

(Love’s Labour’s Lost, Act 5, Scene 2, Lines 2736-2749)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Since you are dear bought, I will love you dear.

(Merchant of Venice, Act 3, Scene 2, Line 1691)