Discussion: An Economic Psychological Experiment: Individualism-Collectivism, Perspective Taking, and Real and Hypothetical Endowment Effects

An Economic Psychological Experiment:  Individualism-Collectivism, Perspective Taking, and  Real and Hypothetical Endowment Effects

IV) DISCUSSION

IV.1) Hypotheses

            In this study, there were four hypotheses concerning the relationships between the real endowment effect, the hypothetical endowment effect, individualism-collectivism and perspective taking. They are presented and elaborated below.

Since it had been thought that the scenarios used to measure WTP (willingness to pay) and WTA (willingness to accept) probed distributive behaviour, a relationship between collectivism and the hypothetical endowment effect was expected. However, there was no support for the first hypothesis predicting a negative correlation between collectivism scores and the hypothetical endowment effect. The correlation coefficient was not significant.

Since it was thought that these scenarios may be associated with perspective taking, a relationship between perspective taking and the hypothetical endowment effect was expected. Hence the second hypothesis predicted a positive correlation between levels of perspective taking and the hypothetical endowment effect. Contrary to this prediction, it was found that the relationship between the two was not significant.

            Since it was thought that the procedure used to assess the real endowment effect necessitated an interaction between former self and present self, a relationship between the real endowment effect on the one hand, and self experience from self perspective and self appearance from self perspective on the other was expected. Binary logistic regression results supported the third hypothesis expecting such a relationship suggesting that real endowment and self experience from self perspective are correlated.

            Finally, the fourth hypothesis predicted a positive correlation between collectivism scores and perspective taking scores, since previous studies had pointed out a possible relationship (Triandis, 1994a, p. 298). Correlational analysis supported the fourth hypothesis. Moreover, it was found that the scores on the subscales of perspective taking pertaining to the other as the target –i.e. other’s experience from self perspective, other’s experience from other’s perspective, other’s appearance from self perspective, and other’s appearance from other’s perspective- were either significantly or marginally significantly correlated with individualism-collectivism scores. This may imply that collectivistic people have a tendency to monitor others. However, the “other”ness presented by the Social Awareness Inventory should be elaborated here: The “other” in the inventory oscillates between intimate or significant “other” (e.g. “my friends”) on the one hand, and distant or insignificant “others” on the other (e.g. “someone else”, “another person”, “other people”). This is maybe a hidden bias of the Social Awareness Inventory. The significance of the “other” in the items was not considered. Furthermore, the distinction between self and other in the items bends towards the Western way of conceptualising the issue. It does not probe perspective taking towards parents, peers, children etc. While reflecting on this point further, one should keep in mind that the major strength of the Individualism-Collectivism Scale comes from the fact that it comprises various types of relationships –including spouses and neighbours. In contrast, the Social Awareness Inventory is not sensitive to such relationships. Most of its items conceived the “other” as a distant or insignificant other and one should question the implication that people high on taking distant or insignificant other’s perspective should be also high on taking intimate or significant other’s perspective. Considering these and similar objections, the finding that the collectivism scores are either significantly or marginally significantly related with subscales of perspective taking pertaining to other as target may imply that collectivistic people tend to take distant or insignificant other’s perspective or those high on collectivism may take others’ perspectives more, even when the other is distant or not significant.

            If one reframes the above finding, one can firmly state that the relationships between individualism-collectivism scores and subscales of perspective taking pertaining to the self are not significant. Maybe this points out that individualistic people and collectivistic people do not differ in terms of the construal of self appearance and self experience regardless of self or other’s perspective. While reflecting on this point further, one should keep in mind that the subscale on which the highest average score was obtained both in Sheldon (1996) and in the present study was self experience from the self perspective.        

In accordance with the literature, it was found in this study that the real endowment effect exists. This means that there is a discrepancy between the levels of WTP and WTA. In other words, it was found that people value the gifts they were given initially more than the goods they were not given. However, external validity of these results may be low, since extrapolations from coffee mugs and chocolate bars to commodities having higher exchange values would be improper. Nevertheless – using Popperian nomenclature (Popper, 1979, pp. 13-14) - one can firmly state that it is not the case that endowment effect does not exist. It exists for at least some pairs of goods.

This study shows that hypothetical endowment effect exists in a statistically significant way, when hypothetical endowment effect is estimated by the general average of the mean differences between WTP and WTA amounts for each participants. In addition, the categorical hypothetical endowment effect was observed in the qualitative responses to the scenarios. However, contrary to the findings of previous studies, the overall hypothetical endowment effect – i.e. the proportion of the participants exhibiting hypothetical endowment effect - was not prevalent in this study. Only 42% of the respondents exhibited the hypothetical endowment effect. Even though this proportion is not high, the overall hypothetical endowment effect still exists with moderate proportions. Considerable variations in the hypothetical endowment effect were observed.

The nonprevalence of overall hypothetical endowment effect indicates a remarkable point relevant to the literature: There are individual differences in the hypothetical endowment effect. There may be many variables underlying these individual differences. Most of them may be due to the properties of the scenarios intending to measure hypothetical endowment effect: While attitudes towards strangers may be such a variable, time conception may be a more central variable. Nevertheless, the variable having possibly the highest explanatory value may be again the (in)significance of the “other” in the scenarios intending to determine the amount of hypothetical endowment effect. It is known that collectivistic people do not treat ingroup and outgroup members in the same manner (Leung, & Bond, 1984). Accordingly, it is not clear whether participants considered the “other” in those scenarios as ingroup members or outgroup members. Pushing this consideration further, one can speculate that collectivistic people may exhibit hypothetical endowment effect when the “other” in the scenario is an outgroup member, but they may exhibit no effect when the “other” in the scenario is an ingroup member. While reflecting on this point further, one should keep in mind that Steins (2000) found that perspective taking performance differs with regard to the intensity of the relationship, and that this is the first study of endowment effect in which a society other than Western European ones or American society was sampled. Hypothetical endowment effect may be a Western construct.

            Perspective taking was a central variable in this study. The subscales centering on self and other on the one hand, and appearance and experience on the other are very important to unfold not only the working model of the endowment effect but also other social phenomena pertaining to interpersonal relationships. In this study, overall levels of perspective taking as well as the subscales of perspective taking were examined.

            IV.2) Contributions of the Study

This study showed that high levels of self experience from self perspective predict the real endowment effect. This is a contribution to the relevant literature. Studies probing possible psychological correlates of the endowment effect are rare. This study can be seen as an attempt to compensate the scarcity of such research. 

            Secondly, this study contributed to the individualism-collectivism literature. It was found that considering other’s perspective was positively correlated with levels of collectivism and negatively correlated with levels of individualism. In other words, collectivists tend to consider – distant - others as target more than individualists in perspective taking. Furthermore, overall levels of perspective taking were also positively correlated with collectivism -and therefore negatively correlated with individualism.

            Thirdly, this study contributed to the perspective taking literature. Sheldon’s Social Awareness Inventory has been an underused measurement tool. Apart from Sheldon (1996), there has been no psychometric study intending to determine its quality. The two factor structure found in Sheldon (1996) was replicated in this study. This strengthens the validity of the inventory.   

IV.3) Limitations of the Study

There are three limitations of the study and they will be illuminative for further studies:

Firstly, in real markets the seller does not own a single commodity, but rather has many. In simulated economies –that is, in laboratories, it would be more realistic to endow the sellers with more than a single good.

Secondly, in this study, the unit of analysis was the individual. A second exploration would be toward investigating the endowment effect as a product of decision making in small and large groups. Maybe the effect would be exaggerated or moderated.

Thirdly, a major point about the procedure is that the relationship on target in the scenarios for WTP and WTA is a short-term relationship. In other words, the “other” in the scenarios is deemed to be met not more than once. It can be speculated that the results would be different in long-term relationships (Plattner, 1998, p. 15). 

IV.4) Future Directions

If the endowment effect is something that naturally occurs, then it may have a survival value. Comparative methodologies that would permit detection of analogous phenomena in lower species would be a particularly interesting and important exploration.

Other candidates for psychological correlates can be moral understanding, justice reasoning, values so and so forth. Those are implicated by the fact that some of the participants responded in a way considering whether the prospective exchanger in WTA and WTP scenarios is sick or poor. For instance they wrote, “I don’t want money. S/he needs it” or “[i]f s/he is sick or poor, I don’t want money.” Using WTA and WTP scenarios in his study to explore hypothetical endowment effect in additional auto safety expenses, McDaniels (1992) obtained similar responses. Some of the participants proposed that they could leave a good freely. They would accept no money or they would not accept to buy/sell. No or zero responses too were frequent in his experiment (McDaniels, 1992, p.198).

IV.5) Conclusion

            In brief, this study shows that there is at least some relationship between real endowment effect and perspective taking, that individualism-collectivism and perspective taking on the one hand, and individualism-collectivism and the constituents of perspective taking pertaining to the other as target are significantly correlated with each other. It contributes to the literature on the endowment effect, perspective taking and individualism-collectivism respectively, by exploring the links between them.     

Source: Gezgin,  U.B.  (2011).  An  Economic  Psychological  Experiment:  Individualism-collectivism, Perspective  Taking,  and  Real  and  Hypothetical  Endowment  Effects.  Germany:  Lambert Publishing. 

AN ECONOMIC PSYCHOLOGICAL EXPERIMENT: INDIVIDUALISM-COLLECTIVISM, PERSPECTIVE TAKING, AND REAL AND HYPOTHETICAL ENDOWMENT EFFECTS Ulas Basar Gezgin ABSTRACT An Economic Psychological Experiment: Individualism-Collectivism, Perspective Taking, and Real and Hypothetical Endowment Effects by Ulas Basar Gezgin             In this study conducted in Boğaziçi University with 121 participants, the psychological correlates of the endowment effect are probed. The endowment effect is the asymmetry between the amount that a given individual would like to pay for a certain good and the amount that this individual would like to accept to sell the same good. There are two types of endowment effect: The real endowment effect is the one observed in real or simulated economies, while the hypothetical endowment effect is the one exhibited for imaginary situations. Individualism-Collectivism and perspective taking are considered as psychological correlates of the endowment effect in this study. The study shows that there is at least some relationship between the real endowment effect and perspective taking and that individualism-collectivism is significantly correlated with perspective taking.                                                    TABLE OF CONTENTS Abstract………………………………………………………………………... Table of Contents……………………………………………………………… List of Tables………………………………………………………………….. List of Appendices……………………………………………………………... I) INTRODUCTION…………………………………………………………….             I.1)Decision-making and Rationality……………………………………             I.2) The Endowment Effect……………………………………………..             I.3) Egocentric Empathy Gaps………………………………………….             I.4) Empathy…………………………………………………………….             1.5) Perspective Taking…………………………………………………             I.6) Individualism-Collectivism…………………………………………             I.7) The Expected Relations……………………………………………..             I.8) Hypotheses………………………………………………………….. II) METHOD…………………………………………………………………….             II.1) Participants…………………………………………………………             II.2) Instruments…………………………………………………………                         II.2.1) Individualism-Collectivism………………………………                         II.2.2) Perspective Taking……………………………………….                         II.2.3) Endowment Effect………………………………………..             II.3) Procedure…………………………………………………………... III) RESULTS…………………………………………………………………             III.1) Real Endowment Effect……………………….………………...                         III.1.1) Endowment Effect…………………………………….                         III.1.2) Order Effect…………………………………………...                         III.1.3) Gender Effect…………………………………………             III.2) Hypothetical Endowment Effect………………………………..                         III.2.1) Quantitative Responses……………………………….                         III.2.2) Qualitative Responses………………………………...             III.3) Perspective Taking……………………………………………...                         III.3.1) Overall Scores and Cronbach Alpha………………….                         III.3.2) Overall Factor Analyses………………………………                         III.3.3) Subscales and Cronbach Alphas………………………             III.4) Individualism-Collectivism……………………………………..                         III.4.1) Overall Scores and Cronbach Alpha………………….             III.5) Hypotheses………………………………………………………                         III.5.1) Hypothesis 1: Collectivism and HE…………………...                         III.5.2) Hypothesis 2: Perspective Taking and HE…………….                         III.5.3) Hypothesis 3: RE, and SES and SAS………………….                         III.5.4) Hypothesis 4: Collectivism and Perspective Taking….. IV) DISCUSSION……………………………………………………………..             IV.1) Hypotheses………………………………………………………             IV.2) Contributions of the Study………………………………………             IV.3) Limitations of the Study…………………………………………             IV.4) Future Directions………………………………………………...             IV.5) Conclusion………………………………………………………. V) REFERENCES…………………………………………………………….. VI) APPENDICES…………………………………………………………….. LIST OF TABLES Table Number                                                                                                      1. Eight Types of Perspective Taking and The Examples……………….         2. Number of Respondents as to Their Quantitative Response Types             for Hypothetical Endowment Scenarios………………………………         3. Categories for Qualitative Responses and Their Respective             Percentages……………………………………………………………         4. Factor Analysis for Subscales of Social Awareness Inventory……….         5. Reliability Coefficients for Subscales of Social Awareness             Inventory………………………………………………………………         6. Binary Logistic Regression Results when Real Endowment Effect is Taken as the Dependent Variable………………………………….. 7. Correlations between Perspective Taking Scores and Individualism-collectivism Scores (n=120)……………………………………………..  LIST OF APPENDICES                                                                                             A)        The Scenarios………………………………………………………….. B)        Scenarios (Turkish form)……………………………………………… C)        Real Endowment Sheets………………………………………………. D)        Real Endowment Sheets (Turkish form)……………………………… E)        The Individualism-Collectivism Scale (Turkish version)…………….. F)         Social Awareness Inventory………………………………………….. G)        Social Awareness Inventory (Turkish form)…………………………. H)        The Flowchart for the Procedure…………………………………….. I)         Debriefing Mail for the Experiment (Turkish form)………………… J)         Debriefing Mail for the Experiment (English form)…………………