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This research proposes that the concept of emotional attachment, and specifically the independent constructs of psychological ownership and affective reaction, can help explain many of the endowment effect findings documented in the literature. We define these constructs and then test them across a set of nine studies in which we both replicate previous and generate new endowment effect findings, and then show that psychological ownership and affective reaction can mediate the effects. In doing so, we offer direct empirical support for the idea of emotional attachment as a driver of loss aversion while also providing practitioners and future endowment effect researchers with new insights about the psychological processes that underlie the endowment effect.

We observe the influence of aesthetic design on consumer behavior involving financial products—an area where financial decision-makers say they do not take aesthetics into account. In a series of three studies we find that the look of a document in hypothetical investment decisions impacts stock valuation and behavior in some but not all situations. Specifically, our results show that calling attention to the influence of design on behavior moderates the effect, including the paradoxical finding that the effect of design is attenuated when investments involve entities for which aesthetics is of intrinsic value.