The endowment effect is one of the most robust and well-studied phenomena in the behavioral decision literature. The dominant explanation for this effect is that loss aversion and/or the psychological value of ownership changes the subjective valuation of an item. The current research presents evidence for an alternative account of endowment that requires no shift in subjective value. We argue that (a) individuals will only agree to exchange (i.e., buy and sell) if they perceive some minimum net gain, an exchange surplus, and (b) existing work cannot disentangle the possible effects of an exchange surplus from genuine shifts in subjective value because ownership and exchange are confounded in standard demonstrations of the endowment effect. Four experiments test this idea by separating the effects of exchange from ownership in various ways. Results indicate that exchange has a substantial effect on prices, that this effect appears to be independent of subjective valuation, and that it can explain valuation differences ordinarily ascribed to ownership. We discuss why individuals might demand an exchange surplus and the implications of this for monetary valuation.

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Organizational Behavior and Human Decision Processes
Sprott School of Business

Ashworth, L. (Laurence), Darke, P.R. (Peter R.), McShane, L, & Vu, T. (Tiffany). (2019). The rules of exchange: The role of an exchange surplus in producing the endowment effect. Organizational Behavior and Human Decision Processes, 152, 11–24. doi:10.1016/j.obhdp.2019.03.012