The Effect of Prior Outcomes on Consumer Sellers’ Evaluations of Planned On-Line Resale

Abstract

Research on account of the prior outcome effect suggests that individuals would become risk-seeking upon prior gains as they are funded with house money (e.g., Garling and Romanus 1997; Thaler and Johnson 1990). Yet some others (e.g., Heath 1995; Thaler and Johnson 1990) propose that prior losses increase risk-taking for deficit accounts closure by break-even seeking. The studies that discuss the above effects mostly focus on sunk costs incurred from prior behaviors and influences on subsequent choices. The concept of resalable merchandise as liquid asset is less addressed. Also, the house money effect is largely examined through experiments of gambling or uncertainty scenarios (e.g., Garling and Romanus 1997; Thaler and Johnson 1990). Studies in more current decision-making contexts such as the rising online resale will help expand the theory’s applicability. As such, study 1 demonstrates a 4 (prior outcomes: multiple gains, multiple losses, mixed gains, mixed losses) by 2 (topical product: handheld game console/down jacket) experimental design and verified how consumer resellers’ sequential perceived online resale value as well as desired profit are influenced by prior outcomes. In line with house money effect (Thaler and Johnson 1990) and Garling and Romanus (1997), consumer resellers incline consumer resellers incline to escalate their commitment and to be risk seeking in the domain of gains instead of losses, thereby increasing their perceived online resale value as well as desired profit. Again, the results of this study confirm Chu and Liao’s (2007) statement, manifest consumer resellers treat their resale-oriented merchandise as liquid assets rather than unrecoverable sunk cost, thus, sunk cost effect submerged in this study. These liquid assets turn into the house money in hand that encourage consumer resellers to take risk, increase their resale value as well as desired profit.