Debunking True Purchase Price Limits in Teenagers
DOI:
https://doi.org/10.47611/jsrhs.v12i3.4766Keywords:
Endowment Effect, Behavioral EconomicsAbstract
This project aims to explore whether or not the endowment effect, a concept in behavioral economics, holds true for adolescents, since this population has not been studied before. The endowment effect occurs when there is a gap between a buyer’s willingness to pay (WTP) and a seller’s willingness to accept (WTA) at a certain price. A WTA:WTP ratio equal to 1 would exhibit traditional economic rationality, and a ratio above 1 would exhibit the endowment effect. This study used survey research in the form of having participants explicit state prices, to investigate how the WTA-WTP discrepancy, a measurement of the endowment effect, varies across economic goods and survey procedure (or how survey questions were worded). The final conclusion that can be drawn from this paper is that high school students exhibit the endowment effect only for durable goods (shoes and electronics), and exhibit the reverse trend of the endowment effect for perishable goods (food and beverage). Additionally, the survey procedure and socioeconomic status were not a contributing factor to the endowment effect. These results, which differ from previous literature regarding the endowment effect, emphasize the increased importance of studying teenage purchasing pricing preferences, compared to prior studies that focused solely on undergraduate business students.
Downloads
References or Bibliography
Ali, E., & Kerpčarová, T. (2019). Family Buying Behaviour: Parents’ perspective of children influence on their buying behaviour (thesis). Högskolan Kristianstad School of Health and Society, Kristianstad, Sweden. https://www.diva-portal.org/smash/get/diva2:1336063/FULLTEXT01.pdf
Alldredge, K., & Grimmelt, A. (2021, August 31). Understanding the ever-evolving, always-surprising consumer. McKinsey & Company. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/understanding-the-ever-evolving-always-surprising-consumer
Bao, H. X., & Gong, C. M. (2016). Endowment Effect and Housing Decisions. International Journal of Strategic Property Management, 20(4), 341–353. https://doi.org/10.3846/1648715x.2016.1192069
Barratt, H., & Shantikumar, S. (2018). Methods of sampling from a population. Methods of sampling from a population | Health Knowledge. https://www.healthknowledge.org.uk/public-health-textbook/research-methods/1a-epidemiology/methods-of-sampling-population
Bauer, T. K., & Schmidt, C. M. (2008). WTP vs. WTA: Christmas Presents and the Endowment Effect. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1316403
Breidert, C., Hahsler, M., & Reutterer, T. (2015). A Review of Methods for Measuring Willingness-to-Pay. Innovative Marketing, 1. https://www.researchgate.net/publication/242382759_A_Review_of_Methods_for_Measuring_Willingness-to-Pay
Chapman, J., Dean, M., Snowberg, E., & Camerer, C. (2021). On the Relation between Willingness to Accept and Willingness to Pay. http://www.columbia.edu/~md3405/Working_Paper_22.pdf
Creswell, John W. (2014). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. 4th ed. Thousand Oaks, California, SAGE Publications
Edwards, S. (2022, November 22). Predictive Analytics 101: Leverage Prediction to Get Business Results. Amplitude. https://amplitude.com/blog/predictive-analytics
Endowment Effect. The Decision Lab. (2022). https://thedecisionlab.com/biases/endowment-effect
Hanemann, W. M. (1991). Willingness to Pay and Willingness to Accept: How Much Can They Differ? American Economic Review, 81(1), 635–647
Hayes, A. (2022, November 5). Understanding the Consumer Goods Sector & How It Works. Investopedia. https://www.investopedia.com/terms/c/consumer-goods-sector.asp
Haymond, A. (2022, Spring). Effects of Socioeconomic Status on Consumer Behavior and Attitudes Towards a Brand’s Image. Honors Theses, University of Nebraska-Lincoln. 425. https://digitalcommons.unl.edu/honorstheses/425
Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1991). Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias. Journal of Economic Perspectives, 5(1), 193–206. https://doi.org/10.1257/jep.5.1.193
Kahneman, D., & Tversky, A. (1979, March). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–292. https://www.jstor.org/stable/pdf/1914185.pdf?refreqid=excelsior%3A733c2074b83ef34e00fe9256d52b7bd5&ab_segments=&origin=&acceptTC=1
Karle, H., & Schumacher, H. (2017). Advertising and attachment: exploiting loss aversion through prepurchase information. The RAND Journal of Economics, 48(4), 927–948. https://www.jstor.org/stable/pdf/26305428.pdf?refreqid=excelsior%3A9c6e1da14aa3684764c3697179b3f803&ab_segments=&origin=&acceptTC=1
Kim, Y., Kling, C. L., & Zhao, J. (2015). Understanding Behavioral Explanations of the WTP-WTA Divergence through a Neoclassical Lens: Implications for Environmental Policy. Annual Review of Resource Economics, 7(1), 169–187. https://doi.org/10.1146/annurev-resource-100913-012501
Kling, C. L., List, J. A., & Zhao, J. (2003). The WTP/WTA Disparity: Have We Been Observing Dynamic Values but Interpreting Them as Static? The Center for Agricultural and Rural Development at Iowa State University. https://www.card.iastate.edu/products/publications/pdf/03wp333.pdf
Lent, M. R., Veur, S. V., Mallya, G., McCoy, T. A., Sanders, T. A., Colby, L., Tewksbury, C. R., Lawman, H. G., Sandoval, B., Sherman, S., Wylie-Rosett, J., & Foster, G. D. (2014, August 13). Corner store purchases made by adults, adolescents and children: items, nutritional characteristics and amount spent. Public Health Nutrition, 18(9). https://doi.org/10.1017/S1368980014001670
Levitt, S. D., List, J. A., Neckermann, S., & Sadoff, S. (2016). The Behavioralist Goes to School: Leveraging Behavioral Economics to Improve Educational Performance. American Economic Journal: Economic Policy, American Economic Association, 8(4), 183–219. https://doi.org/10.3386/w18165
Loss Aversion. The Decision Lab. (2022). https://thedecisionlab.com/biases/loss-aversion
Madki, V., & Sinha, D. J. (2021, July 8). How much does Market Research cost? StartupTalky. https://startuptalky.com/how-much-money-do-companies-spend-on-research/
Mallalieu , L., & Palan, K. M. (2006). How Good A Shopper Am I? Conceptualizing Teenage Girls’ Perceived Shopping Competence. Academy of Marketing Sciences, 3(5). https://cdn.ymaws.com/www.ams-web.org/resource/resmgr/original_amsr/mallalieu05-2006.pdf
Malon, C. (2023, April 19). How Chicago area home values compare by zip code. Chicago Tribune. https://www.chicagotribune.com/data/chicago-average-home-value-20230118-zdx2s6lmlvcqxbvmb7ndfgphz4-story.html
Metzenroth, H. (2010). The Endowment Effect – a Literature Review (thesis). University of Vienna, Vienna. https://core.ac.uk/download/pdf/11592482.pdf
Okada, E. M. (2010). Uncertainty, Risk aversion, and WTA vs. WTP. Marketing Science, 29(1), 75–84. https://doi.org/10.1287/mksc.1080.0480
Piper Sandler Companies. (2021). Fall 2021 Taking Stock With Teens - 21 Years Of Researching U.S. Teens GenZ Insights. Piper Sandler. https://www.pipersandler.com/private/pdf/TSWT_Fall_2021_Full_Report.pdf
Rafaeli, S., & Raban, D. R. (2001, June). The Subjective Value of Information: An experimental comparison of willingness to purchase or sell information (thesis). University of Haifa Graduate School of Business, Haifa, Israel. https://www.researchgate.net/publication/2387908_The_Subjective_Value_of_Information_An_experimental_comparison_of_willingness_to_purchase_or_sell_information
Reference for Business. (2022). Market Research - Percentage, types, benefits, cost. Reference for Business. https://www.referenceforbusiness.com/small/Mail-Op/Market-Research.html
Smith, A., & Anderson, M. (2016, December 19). Online Shopping and E-Commerce. Pew Research Center. https://www.pewresearch.org/internet/2016/12/19/online-shopping-and-e-commerce/
Stobierski, T. (2020, October 20). Willingness to Pay: What It Is & How to Calculate. Harvard Business School. https://online.hbs.edu/blog/post/willingness-to-pay
U.S. Census Bureau. (2023). U.S. Census Bureau QuickFacts: Chicago City, Illinois. U.S. Census Bureau. https://www.census.gov/quickfacts/fact/table/chicagocityillinois/LND110210
U.S. 2010 Census. (2023). ZIP Codes for City of Chicago, IL. Zip-codes.com. https://www.zip-codes.com/city/il-chicago.asp
Weinschenk, G. (2018, March 29). Episode 5: Consumers overvalue what they have, and that's a problem. The Team W Blog. https://www.blog.theteamw.com/2018/02/21/episode-5-willingness-to-accept-money-vs-willingness-to-pay-money/
Witynski, M. (2022). Behavioral Economics, explained. What is behavioral economics? | University of Chicago News. https://news.uchicago.edu/explainer/what-is-behavioral-economics
Published
How to Cite
Issue
Section
Copyright (c) 2023 Maggie Tsyganova; Kerry Catlin
![Creative Commons License](http://i.creativecommons.org/l/by-nc-sa/4.0/88x31.png)
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Copyright holder(s) granted JSR a perpetual, non-exclusive license to distriute & display this article.