Tangible Connections

This article from Booz Allen Hamilton highlights the findings from a study done by researchers at Ohio State University on the "endowment" effect associated with being a leading bidder in online auctions.

The endowment effect is simply the observation that people value an item more once they own it than they do before owning it. This paper suggests that

"... prefactual feelings of ownership and the accompanying emotional attachment toward the auctioned item may lead bidders to overbid."

In other words, being the leading bidder in an online auction creates a "pseudo-endowment" effect and makes a bidder feel like they are loosing a possession (one they never really had) and therefore want to bid again to regain the "lost" item.

This made me think about points-based incentive programs redeemable for tangible awards. If in the design of the program, a forward-looking forecast predicted specific attainment levels of award points and the program asked each participant to "pre-spend" the points on desired items, would the participant be more motivated to achieve the performance forecasted due to the "pseudo-endowment" effect?

Would the participant feel like they had already earned the award and work harder to ensure they received them? Would it be a negative if they saw that their performance was below forecast and one of their pre-selected items was no longer theirs?