Trade-upgrade framing effects: Trades are losses, but upgrades are improvements

Abstract

In two studies, people were reluctant to trade items they own, but glad to accept upgrades with identical end states. The framing of the transaction makes a difference. A mediational analysis suggests that the relationship between the frame of the transaction and measures of value (willingness to accept, WTA) depends on perceived losses. Losses are perceived as greater when the transaction is a trade than as an upgrade. We manipulated perceptions of loss across descriptions of transactions and found that, when the difference in perceptions of losses with trades versus upgrades was large, framing effects were strong. But when the difference was small, framing effects disappeared. These framing effects with identical end states influence WTA because trades are associated with perceived losses, while upgrades are associated with perceived costs.

Keywords

• framing effects
• trade aversion
• loss aversion
• endowment effect
• upgrades