New research on ‘endowment effect’ points to evolutionary roots of cognitive biases
New research from may explain why we sometimes overvalue items we’ve acquired—to an irrational degree—irrespective of their market or sentimental value. This phenomenon is called the endowment effect, and researchers have long puzzled over why it occurs, and why the size of the effect can vary so much across items when it does. It’s important to understand, however, because the endowment effect can lead us to make unpredictable economic decisions, and it has far-reaching implications throughout law, markets and business.
New Vanderbilt research suggests that evolution may play an important role, however–namely, that the items we overvalue most tend to have features that aided our ability to survive and thrive in environments our ancestors encountered long ago (for example, something that might help us attract a mate, which today might be a luxury car). In the new study, an evolutionary approach predicted more than 50 percent of the variation in the size of the endowment effect in humans. This is the first study to successfully predict variations in the size of the effect across a large and novel set of items.
Collaborating on the work are Owen Jones, the Glenn M. Weaver, M.D. and Mary Ellen Weaver Chair in Law, Brain, and Behavior, professor of biological sciences, director of the MacArthur Foundation Research Network on Law and Neuroscience, and @EvolutionVU Advisory Board member, Christopher Jaeger, acting assistant professor of lawyering at New York University and a recent Vanderbilt J.D./Ph.D. graduate, Sarah Brosnan, Distinguished University Professor of Psychology, Philosophy and Neuroscience at Georgia State University, and Daniel Levin, professor of psychology and human development at Vanderbilt University and @EvolutionVU member. The study appeared in the journal Evolution and Human Behavior.