The Limits of Fungibility: Relational Schemata and the Value of Things

Abstract

Four experiments test predictions on endowment and mental accounting effects of a theoretical perspective that stresses the symbolic-relational significance for consumer transactions and that posits the placement of qualitative boundaries on fungibility. Although people accepted proposals to buy objects acquired in marketpricing relationships as routine, the same proposals in communal-sharing, authority-ranking, and equality-matching relationships triggered distress and erratically high dollar valuations. Symbolic ownership history also moderated valuations in a purely market setting, and the effects of symbolic-relational source of income extended even to spending decisions. Examination of the model’s ordinal predictions revealed stronger effects for equality-matching than for authority-ranking relationships. Influential reviews of the consumer behavior literature have argued for the foundational significance of empirical work stimulated by prospect theory and the heuristics-andbiases research program (Simonson et al. 2000). This work has led to the discovery of a host of robust and sometimes counterintuitive findings such as the endowment effect and mental accounting. Within the behavioral-decision-theory tradition, the reigning normative standards are rooted in microeconomic theory, which assumes that people treat all values as fungible or translatable to each other on a dollar metric. Deviations from perfect commensurability are taken as presumptive evidence for cognitive shortcomings. It is a truism of economic theory that, for example, when income effects are small, there should be negligible differences between a person’s maximum willingness to pay for a good and the minimum compensation demanded for the same good (willingness to accept). It has, however, been well established experimentally that people often demand much more to give up an object they already possess than *A. Peter McGraw