Abstract
Transaction demand refers to the motivation to complete a transaction. As transaction demand increases, owners should sell at lower prices and buyers should buy at higher ones. It was predicted that the endowment effect—the tendency for minimum selling price to exceed maximum buying price for a particular commodity—should be minimized when buyers and sellers have high transaction demand. The results of two experiments supported this hypothesis: In Experiment 1, the endowment effect was observed when participants imagined another individual wanting to buy from or sell to them, but not when they imagined wanting to buy from or sell to another individual. In Experiment 2, a reversal of the endowment effect was observed when transaction demand was high for both prospective buyers and sellers. The findings highlight the importance of motivational factors in addition to other factors (e.g., loss aversion, reference dependence) in determining behavior.
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