Individuals are generally reluctant to trade goods—a phenomenon identified as the endowment effect. This paper focuses on consumers’ puzzling reluctance to exchange gambles, and in particular lottery tickets with identical distribution (i.e., same odds of winning), and identifies the ticket’s vividness as an important moderator. Three studies demonstrate that individuals are more willing to exchange less vivid lottery tickets (e.g., tickets concealed in envelopes, or tickets with an unknown number) compared to more vivid tickets (e.g., tickets not concealed in envelopes, or tickets with a known number) when offered an incentive to exchange. Moreover, this effect is mediated by anticipated regret, such that less regret is anticipated when exchanging less vivid tickets, thus increasing individuals’ willingness to exchange tickets.

We employed simple gambles to investigate information processing in relation to the compatibility effect. Subjects should be more likely to engage in a deliberative thinking strategy when completing a pricing task rather than a rating task. We used eye-tracking methodology to measure information acquisition and processing in order to test the above hypothesis as well as to show that losses and alternatives with uncertain outcomes are more likely than gains and alternatives with sure outcomes to be processed through a deliberative thinking process. Results showed that pupil dilations, fixation duration and number of fixations increased when subjects evaluated the gambles with a pricing task. Additionally, the number of fixations increased as the gamble outcome became increasingly negative and when the outcome was uncertain (vs. sure). Fixations were also predictive of subjects’ final evaluations of the gambles. We discuss our results in light of the cognitive processes underlying different response modes in economic preferences.

When given a desirable item, people have a tendency to value this owned item more than an equally-desirable, unowned item. Conversely, when the endowed item is undesirable, in some circumstances people have a tendency to swap it for an equally undesirable item, a phenomenon known as the reversed endowment effect. The fact that the endowment effect can reverse for undesirable items has been taken as evidence against loss aversion being the underlying cause of the endowment effect. This study represents the first time that the reversed endowment effect has been observed for choices with real consequences. However, we find that the reversed endowment effect occurs only when participants’ ability to compare the available choice options is limited. We further show that these endowment reversals can also be induced for choices between desirable options and removed for choices between undesirable options by manipulating the expectations participants have when making a choice. Finally, we show that our data, including endowment reversals, can in principle be explained by loss aversion.