title: Trading experience modulates anterior insula to reduce the endowment effect.
abstract: People often demand a greater price when selling goods that they own than they would pay to purchase the same goods-a well-known economic bias called the endowment effect. The endowment effect has been found to be muted among experienced traders, but little is known about how trading experience reduces the endowment effect. We show that when selling, experienced traders exhibit lower right anterior insula activity, but no differences in nucleus accumbens or orbitofrontal activation, compared with inexperienced traders. Furthermore, insula activation mediates the effect of experience on the endowment effect. Similar results are obtained for inexperienced traders who are incentivized to gain trading experience. This finding indicates that frequent trading likely mitigates the endowment effect indirectly by modifying negative affective responses in the context of selling.
authors.affiliation: Department of Economics, The University of Chicago, Chicago, IL 60637; Department of Psychology, The University of Chicago, Chicago, IL 60637;
authors.forename: Lester C P
authors.initials: LC
authors.lastname: Tong
authors.affiliation: Department of Economics, The University of Chicago, Chicago, IL 60637;
authors.forename: Karen J
authors.initials: KJ
authors.lastname: Ye
authors.affiliation: Research School of Finance, Actuarial Studies & Statistics, The Australian National University, Acton, ACT 2601, Australia;
authors.forename: Kentaro
authors.initials: K
authors.lastname: Asai
authors.affiliation: Department of Economics, Koç University, 34450 Istanbul, Turkey.
authors.forename: Seda
authors.initials: S
authors.lastname: Ertac
authors.affiliation: Department of Economics, The University of Chicago, Chicago, IL 60637;
authors.forename: John A
authors.initials: JA
authors.lastname: List
authors.affiliation: Department of Psychology, The University of Chicago, Chicago, IL 60637;
authors.forename: Howard C
authors.initials: HC
authors.lastname: Nusbaum
authors.affiliation: Department of Economics, The University of Chicago, Chicago, IL 60637; hortacsu@uchicago.edu.
authors.forename: Ali
authors.initials: A
authors.lastname: Hortaçsu
mesh_terms: D000328:Adult; D002540:Cerebral Cortex / Q000502:physiology*; D003258:Consumer Behavior; D005376:Financial Management; D006801:Humans; D008279:Magnetic Resonance Imaging; D008875:Middle Aged; D009714:Nucleus Accumbens / Q000502:physiology; D017397:Prefrontal Cortex / Q000502:physiology
keywords: decision-making; loss aversion; neuroeconomics; training