Mere Ownership Effect

Definition

The mere ownership effect refers to an individual's tendency to evaluate an object more favorably merely because he or she owns it. The endowment effect is a related phenomenon that concerns the finding that sellers require more money to sell an object than buyers are willing to pay for it. Taken together, these phenomena indicate that ownership is a psychologically meaningful variable that can influence the way that one thinks about and evaluates objects in the external world.

Context and Importance

The mere ownership effect has been hypothesized to occur because people are motivated to see themselves in a positive light. Thus, the mere ownership effect illustrates the importance of the self in mediating how people interpret the world.

Self-concept refers to the beliefs a person holds about the self. Self-esteem refers to how much a person likes or dislikes the self. Because people are motivated to maintain high self-esteem, people strive to see themselves in a positive light. This tendency toward self-enhancement can take many forms. For example, people tend to underestimate the likelihood of experiencing a negative event such as an illness or accident. Similarly, individuals overestimate their abilities on skills such as driving a car or behaving in a morally correct way. People also focus selectively on positive, rather than negative, beliefs about themselves.

People show indirect self-enhancement by positively evaluating targets associated with the self. For [Page 559]example, people evaluate their own groups more positively than others' groups. The basis for association can include significant dimensions such as race or irrelevant dimensions such as a shared birth date.

Explaining Ownership Effects

The mere ownership effect is a form of indirect selfenhancement similar to the bias people show regarding their own, rather than others', groups. The concept of ownership creates a psychological association between the owner and the object. To the extent that an owner sees the owned object in a favorable light, he or she can then indirectly come to see the self in a more favorable light, as well.

The endowment effect is thought to operate for a different reason than self-enhancement. The endowment effect works because of the different way that people think about gains and losses. People tend to be more distressed by losses than they are made happy by gains. For example, people would probably be more irate by a $10-a-week pay cut than they would be made happy by a $10-a-week raise. In other words, the absolute value of their change in emotional state would be larger for a loss than a gain.

According to the gain–loss explanation for the endowment effect, selling a possession is perceived as a loss. In contrast, buying is seen as a gain. The seller's reluctance to accept a loss causes him or her to ask for a little extra compensation that potential buyers are unwilling to provide.

Both the mere ownership effect and the endowment effect reflect an important conflict that has occurred between psychology and economics. If people behaved in the purely rational fashion that economics assumes, then the endowment effect and the mere ownership effect would not occur. From the perspective of economics, the object is the same regardless of who owns it. The idea that owners think about the object differently than nonowners do indicates that a full understanding of economics will have to acknowledge psychological principles.

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