When Payments Go Social : The Use of Person-to-Person Payment Methods Attenuates the Endowment Effect

The current research examines how the use of Person-to-person (P2P) payment methods affects consumer behavior. P2P payments are an increasingly common way for consumers to make and accept payments. P2P platforms are positioned in the marketplace as a social payment option and allow consumers to directly exchange money with peers. We propose that because of the social positioning and unique features, consumers develop a distinct mental association between P2P payment methods and social connection, which affects their pricing decisions. Seven studies test this proposition in the context of the endowment effect. We demonstrate that when consumers anticipate using P2P, the classic endowment effect disappears. Specifically, compared to other payment options, when they use P2P sellers are willing to accept somewhat lower prices, and buyers are willing to pay somewhat more. We explain this finding by drawing on research on schema theory and spreading activation. We posit that using a P2P payment method makes concepts related to social connection more accessible, which in turn leads to convergent pricing decisions. Theoretical and practical implications are discussed