Selling the Forest, Buying the Trees: The Effect of Construal Level on Seller-Buyer Price Discrepancy

Four studies demonstrate that selling and buying prices are differentially influenced by the value of products ’ low- and high-level construal features. The study shows that sellers construe products at a higher level than do buyers and owners. Based on this, this study predicts and demonstrates that selling prices exceed buying prices when (1) the object’s primary aspects are superior and the object’s sec-ondary aspects are inferior but not vice versa, (2) individuals focus on a product’s desirability-related aspects rather than the same product’s feasibility-related as-pects, (3) individuals are in a “why ” mind-set but not when they are in a “how” mind-set, and (4) the product’s desirability aspects are superior and its feasibility aspects inferior but not vice versa. Further, sellers ’ and buyers ’ differential construal mediates the difference between seller and buyer prices, which emerges when a product’s value derives from high-level features but not from low-level features. Although microeconomic theory (Willig 1976) predictsthat ownership of an item should not have an impact on how much the item is valued (Coase 1960), numerous laboratory and field studies find that selling prices of an object are several times higher than its buying prices (Boyce et al. 1992; Irwin 1994; Kahneman, Knetsch, and Thaler 1990; Shogren et al. 1994). This discrepancy between selling and buying prices of an object, sometimes referred to as the “endowment effect ” (Thaler 1980), has been observed in a myriad of domains ranging from everyday market items such as coffee mugs and pens (Kahneman et al. 1990) to