Endowment vs. Previous Preferences: Which Cue Drives Consumer Decision-Making?

Research on the endowment effect has shown that simply endowing people with a good can increase the salience of the good and make it more likely to be chosen over alternatives. Other lines of research suggest that previous preferences are hard to override and may be chronically accessible to decision makers. We investigate the relationship between previous preferences (i.e. brand loyalty and purchasing habits) and the endowment effect in a switching paradigm and measure participants’ memory retrieval orders to assess the salience of choice options. In Experiment 1 (N = 202), participants interacted with a smartphone of a brand either in line with or contradicting their brand loyalty. We find that participants high in brand loyalty are most likely to be influenced by the experimental condition than those low in brand loyalty. In Experiment 2 (N = 486), we endowed participants with a can of Coke or Lipton and measured their purchasing habits of these products. We find main effects of both endowment and purchasing habits. In both experiments, the salience of cues was affected by both previous preferences as well as endowment. We show that the endowment effect is not completely immune to previous preferences: It can be weakened for people with (strong) previous preferences in favor of an alternative option or boosted for people with (high) previous preferences in favor of the endowed option.