Regret, disappointment and the endowment effect

Abstract

The endowment effect is the finding that minimum selling prices for a particular good exceed maximum buying prices. We build on and extend previous research showing that emotions influence the endowment effect, and reveal that the two negatively valenced decision-related emotions, regret and disappointment, have distinct effects on the valuation of an object. We found that an induction of regret eliminates the classic endowment effect, whereas an induction of disappointment reverses it. The findings demonstrate the necessity of a specific emotion approach to understand the effects on decision making.