After a systematic review of the literature on the endowment effect, Feng SHENG and his team have identified two mechanisms that lead to the failure of transactions.

The first is "greed", i.e., neither buyer nor seller intends to suffer a loss in the transaction. As a result, buyers tend to underestimate the value of goods in transactions, while sellers tend to overestimate the value of goods in transactions.

In contrast, the divergence in the subjective valuation of goods by buyers and sellers leads to an endowment effect.

The second cause is "laziness", i.e., both buyers and sellers have the inertia not to act. Status quo bias is a natural inertia of people that prevents them from doing things that could change the status quo, such as trading.

To overcome this inertia and make a transaction, both buyers and sellers need additional incentives, which manifest themselves in bargaining, i.e., buyers need a discount and sellers a premium, which leads to an endowment effect.

Feng SHENG and his team said that previous studies on the mechanism of the endowment effect often focused on greed or laziness separately. But the question is, are buyers and sellers greedy and lazy ?

As we all know, decisions are often not made overnight, there is a process. In this process, decision-makers must process and integrate information and then make a choice.

The variance in this decision-making process is reflected not only in the decision whether to trade, but also in the time it takes to make the decision.

Feng SHENG and his team believe that the choice and time of buyers and sellers in transactions can simultaneously reflect the greed and laziness of buyers and sellers. To test this hypothesis, they recruited a group of subjects to conduct trading experiments.

In the experiment, the subjects acted as buyers or sellers and traded a specific commodity - lottery tickets. Each lottery ticket is assigned a certain probability of being exchanged for a certain amount of money, i.e., each lottery ticket has a certain expected value.

Buyers and sellers must decide whether to buy" or "sell " their lottery tickets with different face values (green field below) at different prices (blue field below).

As the experimental results show, the higher the price, the lower the probability that the buyer chooses to buy a lottery ticket (red line below) and the higher the probability that the seller chooses to sell (blue line below). The price for the 50% probability of buying or selling reflects the psychological price of the buyer or seller.

They found that "greed" manifests itself in the attention distribution of buyers and sellers during the transaction process.

Previous studies have shown that the allocation of attention not only reflects people’s preferences but also responds to people’s preferences. When making decisions, people tend to pay more attention to the information that is important to them, and the degree of attention to the information they perceive is further enhanced.

Feng SHENG and his team found that buyers and sellers repeatedly search for prices and goods with their eyes when making retail decisions. The difference is that sellers pay more attention to the goods than buyers.

Moreover, the difference in their attention to goods is simply related to the difference in their subjective evaluation of goods.

In the research, Feng SHENG and his team also integrated the attention distribution into their calculation model to describe the dynamic changes of sellers’ and buyers’ evaluations of goods with the attention distribution.

Specifically, the new model assumes that their ratings increase when buyers or sellers pay attention to goods, and that their ratings decrease when they pay attention to prices.

This model, which integrates attention, better explains the behavior of buyers and sellers. Moreover, the research results are consistent with the hypothesis that buyers and sellers rate goods more when they pay attention to them than when they pay attention to their prices (left).

Based on this finding, they have uncovered another interesting phenomenon (top right):

• When buyers pay attention to the price and sellers pay attention to the goods, the difference between their valuations of the goods is the greatest and it is the most difficult to make a deal;

• When buyers pay attention to the goods and sellers pay attention to the price, the difference between their valuations of the goods is the smallest and it is easiest to make a deal.

In addition to the distribution of attention, Feng SHENG and his team also found that "laziness" is related to the change in eye-pupil size of buyers and sellers in the transactions.

As we all know, the degree of pupil dilation in the decision-making process often reflects the degree of brain utilization. The more difficult it is to make a decision, the larger the pupils are.

According to Feng SHENG and his team’s calculation model, buyers need to collect more evidence when they decide to buy than when they decide not to buy, so buyers should have larger pupils when they decide to buy.

Similarly, sellers need to gather more evidence when they decide to sell than when they decide not to sell, so sellers should have larger pupils when they decide to sell.

The research results are consistent with the hypotheses: • When buyers choose to buy, their pupils are more dilated than when they choose not to buy; when sellers choose to sell, their pupils are more dilated than when they choose not to sell.

At the same time, the extent of pupil dilation in buyers and sellers who decide to buy, or sell is related to their inertia of the status quo attitude. The greater the inertia, the larger the pupil when they decide to trade to overcome the inertia, which means they have made more effort.

Previous studies on the endowment effect often focus only on the greed or laziness of buyers and sellers and do not sort out the relationship between them.

This study introduces an innovative process model for retail decision-making that organically integrates greed and laziness in transactions into a computational framework. Based on this computational model, we can identify different types of trading individuals and quantitatively distinguish the different contributions of greed and laziness to the endowment effect.

Attention to goods not only reflects but also influences the valuation of goods by buyers and sellers.

It is easiest to make a deal when the buyer is concerned about the commodity and the seller is concerned about the price, i.e., when both parties are concerned about what they can get in the transaction.

It is most difficult to make a deal when the buyer is concerned about the price and the seller is concerned about the goods, i.e., when both parties are concerned about what they might lose in the transaction.

Previous studies on transactions rarely consider changes in the pupils of both parties.

Based on the relationship between pupil change and inertia, this study found for the first time that a transaction is most likely to be completed when the pupils of both parties are dilated.

The theory of this study is to promote the transaction, it is necessary to combat the greed and laziness of both parties.

To combat "greed", we can draw the attention of both parties to the transaction, i.e., we can make the buyers pay attention to the goods and the sellers pay attention to the prices.

To deal with "laziness", we can reduce the effort required for the transaction, e.g., by making agreeing to trade (buying or selling) the default option in the trading system.