Trading under the influence: The effects of psychological ownership on economic decision-making

Abstract

The current chapter examines the role of psychological ownership in different economic decision-making contexts. These include the allocation of personal resources, trade-offs between costs and benefits, and subjective valuations reflecting underlying preferences. Economic decision-making usually coincides with a change in legal ownership. However, feelings of ownership need not coincide with actually owning or possessing anything. We investigate the influence of psychological and legal ownership on buying and selling (as seen in the endowment effect), general bargaining behavior, and prosocial decision-making in the context of charitable giving. Different theoretical accounts for these economic behaviors are reviewed with a specific focus on the prominent role that psychological ownership can play as an underlying mechanism for each. In buying and selling situations, ownership of an object may change people's self-perception by creating affective associations to the object and increasing its psychological value. Similarly, in bargaining and coordination decisions, different contextual cues (such as proximity) can suggest psychological ownership over objects and thereby influence cooperative behavior. Finally, psychological ownership can influence prosocial decision-making by increasing affective reactions, moral obligations, and perceived effectiveness. We close with a proposal for a holistic approach to understand the relationship between psychological ownership and economic decision-making.