Is the Endowment Effect an Expectations Effect?

A hallmark result within behavioral economics is that individuals' choices are affected by current endowments. A recent theory due to Kőszegi and Rabin (2006) explains such endowment effect with a model of expectations-based reference-dependent preferences. Departing from past work, we conduct complementary experiments to disentangle expectations — verified probabilistic beliefs held by subjects — from other features of endowment — such as “assignment” to a good — hence allowing us to compare the effect of expectations with that of other variations. While mere assignment can affect choices, we do not find a large role in the effect for Kőszegi-Rabin expectations