Decision Confidence and the Endowment Effect: A Case Study Among Undergraduate Students in the University of Malakand (Pakistan)

Abstract

Behavioural economics combines psychology with economics, demonstrating how cognitive biases influence decision-making beyond the realm of rational choice theory. One of the most robust is the Endowment Effect, where individuals value owned items more than identical non-owned items. This study examines the influence of decision confidence on ownership, valuation, and exchange behaviour among undergraduate students in Pakistan. A quasi-experimental design was employed, with 112 students randomly assigned to receive either a book or a ceramic mug. Data on willingness-to-accept (WTA), willingness-to-pay (WTP), exchange decisions, and decision confidence were collected through structured questionnaires. Results revealed that a large majority (81%) reported high confidence in their decisions (p = .001), supporting Hypothesis 1. Confidence was also linked to greater reluctance to exchange items, indicating that it reinforced decisiveness in ownership choices. However, Hypothesis 2 was not supported, as confidence did not significantly influence monetary valuations (r < .12, p > .39). These findings suggest that while confidence drives rigidity in ownership decisions, it does not inflate economic value. The study contributes to behavioural economics by highlighting confidence as a factor that strengthens decisiveness rather than valuation, and by providing evidence from a non-Western context, offering insights relevant for educators, policymakers, and marketers.