Skip to main content
SpringerLink
Log in

Endowment Effect in negotiations: group versus individual decision-making

  • Published:
Theory and Decision Aims and scope Submit manuscript

Abstract

The study’s two aims are: (a) to investigate whether groups, as compared to individuals, show a different degree of Endowment Effect (EE) during the negotiating of intangible assets, such as leisure time and (b) to gain some insight into the underlying mechanism behind groups’ decision-making processes. A total of 138 graduate students were randomly assigned to 35 groups of 3 members each; and 33 were randomly labeled as “individuals.” The study simulated two scenarios in which the students, both individuals and groups, had to decide what their demands from the university authorities were—once as “sellers” and another time as “buyers” in regard to their own leisure time. The findings indicate the presence of an Endowment Effect (EE) in both individuals and groups. However, groups significantly amplified the Endowment Effect in comparison to individuals. The mechanism which best explains why groups tend to amplify negotiating decisions was found to be the “Majority Rule,” but the “leader” also influences such amplification.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

References

  • Bazerman, M. H., Magliozzi, T., & Neale, M. (1985). Integrative bargaining in a competitive market. Organization Behavior and Human Decision Processes, 35(211), 228.

    Google Scholar 

  • Belk, R. W. (1988). Possessions and the extended self. Journal of Consumer Research, 15, 139–168.

    Article  Google Scholar 

  • Bornstein, G., & Yaniv, I. (1998). Individual and group behavior in the ultimatum game: Are groups more “rational” players? Experimental Economics, 1, 101–108.

    Google Scholar 

  • Bottom, W. P. (1998). Negotiator risk: Sources of uncertainty and the impact of reference points on negotiated agreement. Organization Behavior and Human Decision Processes, 76, 89–112.

    Google Scholar 

  • Burnstein, E., & Vinokur, A. (1977). Persuasive argumentation and social comparison as determinants of attitude polarization. Journal of Experimental Social Psychology, 13(4), 315–332.

    Article  Google Scholar 

  • Davis, J. H. (1996). Group decision making and quantitative judgments: A consensus model. In E. Witte & J. H. Davis (Eds.), Understanding group behavior: Consensual action by small groups (Vol. 1, pp. 35–60). Hillsdale, NJ: Erlbaum.

  • De Dreu, C. K. W., Carnevale, P. J. D., Emans, B. J. M., & van de Vliert, E. (1994). Effects of Gain/Loss frames in negotiations: Loss Aversion, mismatching, and frame adoption. Organization Behavior and Human Decision Processes, 60(1), 90–107.

    Article  Google Scholar 

  • Galin, A. (2009). Proposal sequence and the endowment effect in negotiation. International Journal of Conflict Management, 20(3), 212–227.

    Article  Google Scholar 

  • Galin, A., Gross, M., Egozy, I., & Sapir, S. (2006). The endowment effect on academic chores trade-off (ACTO). Theory and Decision, 60(2–3), 335–357.

    Article  Google Scholar 

  • Gimpel, H. (2007). Loss aversion and reference-dependent preferences in multi-attribute negotiations. Group Decision and Negotiation, 16(4), 303–319.

    Article  Google Scholar 

  • Glöckner, A., Kleber, J., Tontrup, S., & Bechtold, S. (2009). The Endowment Effect in Groups with and without Strategic Incentives. Bonn: Max Planck Institute for Research on Collective Goods : Working Paper.

  • Hoorens, V., Remmers, N., & Van de Reit, K. (1999). Time is an amazingly variable amount of money: Endowment and ownership effects in the subjective value of working time. Journal of Economic Psychology, 20, 383–404.

    Article  Google Scholar 

  • Isenberg, D. J. (1986). Group polarization: A critical reviw and meta analysis. Journal of Personality and Social Psychology, 50(6), 1141–1151.

    Article  Google Scholar 

  • Kahneman, D., & Knetsch, J. L. (1992). The endowment effect, loss aversion, and the status quo bias. In R.H. Thaler (Ed.), The Winner’s Curse (pp. 63–79). Princeton: Princeton University Press.

  • Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1990). Experimental tests of the endowment effect and the coase theorem. Journal of Political Economy, 98(6), 1325–1348.

    Article  Google Scholar 

  • Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 263–291.

    Article  Google Scholar 

  • Kerr, N. L., MacCoun, R. J., & Kramer, G. P. (1996). Bias in judgment: Comparing individuals and groups. Psychological Review, 103(4), 687–719.

    Article  Google Scholar 

  • Knetsch, J. L. (1989). The endowment effect and evidence of nonreversible indifference curves. American Economic Review, 79, 1277–1284.

    Google Scholar 

  • Knetsch, J. L., & Sinden, J. A. (1984). Willingness to pay and compensation demanded: Experimental evidence of an unexpected disparity in measures of value. Quarterly Journal of Economics, 99, 507–521.

    Article  Google Scholar 

  • Kugler, T., Bornstein, G., Kocher, M. G., & Sutter, M. (2007). Trust between individuals and groups: Groups are less trusting than individuals but just as trustworthy. Journal of Economic Psychology, 28, 646–657.

    Article  Google Scholar 

  • Luhan, W. J., Kocher, M. G., & Sutter, M. (2009). Group polarization in the team dictator game reconsidered. Experimental Economics, 12, 26–41.

    Article  Google Scholar 

  • Morgan, P. M., & Tindale, R. S. (2002). Groups vs. individual performance in mixed-motive situations: Exploring an inconsistency. Organizational Behavior and Human Decision Processes, 87(1), 44–65.

    Article  Google Scholar 

  • Myers, D. G., & Lamm, H. (1976). The group polarization phenomenon. Psychological Bulletin, 83, 602–627.

    Article  Google Scholar 

  • Ortona, G., & Scacciati, F. (1992). New experiments on the endowment effect. Journal of Economic Psychology, 13, 277–296.

    Article  Google Scholar 

  • Paese, P. W., Bieser, M., & Tubbs, M. E. (1993). Framing effects and choice shifts in group decision making. Organizational Behavior and Human Decision Processes, 56(1), 149–165.

    Article  Google Scholar 

  • Reb, J., & Connolly, T. (2007). Possession, feeling of ownership and Endowment Effect. Judgment and Decision Making, 2(2), 107–114.

    Google Scholar 

  • Schopler, J., & Insko, C. A. (1992). The discontinuity effect in interpersonal and intergroup relations: Generality and mediation. European Review of Social Psychology, 3, 121–151.

    Article  Google Scholar 

  • Schopler, J., Insko, C. A., Currey, D., Smith, S., Brazil, D., Riggins, T., et al. (1994). The survival of cooperative tradition in the intergroup discontinuity context. Motivation and Emotion, 18(4), 301–315.

    Article  Google Scholar 

  • Thompson, L. L. (2001). The mind and heart of the negotiator (pp. 18–19, 307–308). London: Prentice Hall.

  • Thompson, L., Peterson, E., & Brodt, S. (1996). Team negotiation: An examination of integrative and distributive bargaining. Journal of Personality and Social Psychology, 70(1), 66–78.

    Google Scholar 

  • Tindale, R. S., Meisenhelder, H. M., Dykema-Engblade, A. A., & Hogg, M. A. (2001). Shared cognition in small groups. In M. A. Hogg & R. S. Tindale (Eds.), Blackwell handbook of social psychology: Group processes (pp. 1–30). Malden, MA: Blackwell.

    Google Scholar 

  • Van Boven, L., Loewenstein, G., & Dunning, D. (2003). Mispredicting the endowment effect: Underestimation of owners’ selling prices by buyer’s agents. Journal of Economic Behavior and Organization, 51(3), 351–356.

    Article  Google Scholar 

  • Yaniv, I. (2011). Group diversity and decision quality: Amplication and attenuation of framing effect. International Journal of Forecasting, 27, 41–49.

    Article  Google Scholar 

Download references

Acknowledgments

I would like to thank Zana Novikov and Gallia Menachem for their help with the data collection. I am also grateful to Dr. Miron Gross and Irit Egozy for their cooperation and useful suggestions in previous studies. Many thanks are due to the Henry Crown Institute of Business Research in Israel and Tel Aviv University Research Authority, which supported this research.

Author information

Authors and Affiliations

  1. Tel-Aviv University, Tel-Aviv, Israel

    Amira Galin

Authors
  1. Amira Galin
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Amira Galin.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Galin, A. Endowment Effect in negotiations: group versus individual decision-making. Theory Decis 75, 389–401 (2013). https://doi.org/10.1007/s11238-012-9350-3

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11238-012-9350-3

Keywords

Search

Navigation