Empathy for the Partner Eliminates the Endowment Effect

The endowment effect is a long-standing and powerful phenomenon in behavioral economics whereby people consistently overvalue objects they possess compared to the prices buyers will offer to acquire them. The endowment effect is usually considered irrational and causes disadvantageous choices in realms from online auctions to home sales to domestic clutter. Finding ways to reduce the impact of endowment processes could benefit people and society in myriad ways. Drawing from social psychology, we predicted that people would be more generous toward partners in a common experimental endowment mug task when their partner was portrayed as in pain or need. Combining existing study methods, two pilot studies successfully replicated the endowment effect in control conditions but eliminated or reversed it toward partners in physical (N = 156) or emotional (N = 278) pain (respectively). A pre-registered, in-person study (N = 106) directly contrasted physical pain, emotional pain, and control conditions. We again replicated the endowment effect toward control partners and eliminated it toward partners in physical or emotional pain (buyer prices increased and seller prices decreased; ηp2 = .13). People’s generosity toward those in need can be harnessed to release them from an often troubling and disadvantageous need to hold onto unneeded items that could benefit others.