The neural correlates of endowment effect without economic transaction

Area of Science:

• Neuroeconomics
• Behavioral Economics
• Cognitive Neuroscience

Background:

• The endowment effect describes how people value owned items more than similar unowned items.
• Prospect Theory suggests losses loom larger than gains, influencing economic valuation and creating a willingness to accept (WTA) and willingness to pay (WTP) gap.
• Understanding the neural basis of this valuation discrepancy is crucial for economic decision-making.

Purpose of the Study:

• To investigate the neural correlates of the endowment effect using functional magnetic resonance imaging (fMRI).
• To examine the brain activation patterns during a pricing task that elicits the WTA/WTP discrepancy without actual economic transactions.

Main Methods:

• Functional magnetic resonance imaging (fMRI) was employed to observe brain activity during a pricing task.
• Voxel-based morphometry (VBM) was used to analyze the relationship between brain structure and the WTA/WTP ratio.
• Participants performed a simple pricing task to assess subjective value estimation.

Main Results:

• Brain activation in the right inferior frontal gyrus (IFG) was significantly associated with the price discrepancy observed in the endowment effect.
• A positive correlation was found between gray matter concentration in the right IFG and the WTA/WTP ratio.
• These findings highlight the IFG's role in valuation inconsistencies.

Conclusions:

• The right inferior frontal gyrus (IFG) plays a critical functional role in the endowment effect and WTA/WTP discrepancy.
• This region may integrate loss aversion signals from the insula with expected value computations.
• The study demonstrates the IFG's involvement in subjective pricing, even in the absence of real economic gains or losses.