Notes on Atasoy & Morewedge (2018) – Digital Goods Are Valued Less Than Physical Goods

Paper: “Digital Goods Are Valued Less Than Physical Goods,” Journal of Consumer Research, 44 (6), 1343–57.

Main Topic or Phenomenon

This paper investigates the valuation difference between digital and physical versions of the same goods. Despite digital goods offering numerous advantages (immediate access, portability, no degradation), consumers consistently ascribe lower value to digital goods compared to their physical counterparts across various product categories including photographs, books, and films.

Theoretical Construct

Psychological Ownership: The feeling that a target object is “mine” and part of the extended self, even before actual legal ownership occurs. This psychological state emerges through three key routes:

• Perceived Control: The ability to influence, manipulate, or have power over an object
• Self-Investment: Putting one’s energy, time, or attention into an object
• Intimate Knowledge: Deep familiarity with an object’s details and characteristics

The paper proposes that physical goods have greater capacity to garner psychological ownership than digital goods primarily because their materiality enables greater perceived control through touching, holding, and physical manipulation.

Key Findings

1. Main Effect: Across five experiments, people consistently valued physical goods more than equivalent digital goods, demonstrated through:

   • Higher pay-what-you-want donations (Experiment 1)
   • Greater willingness to pay (Experiments 2, 3, 5)
   • Higher purchase intentions (Experiment 4)

2. Mediation: Psychological ownership partially mediates the relationship between product format and valuation. Physical goods generate stronger feelings of ownership, which increases their perceived value.

3. Perceived Control Mechanism: Individual differences in need for control moderate the psychological ownership effect. People with higher need for control show stronger preference for physical over digital goods.

4. Robustness: The effect persists when controlling for production costs, resale value, consumption utility, permanence, and retail price perceptions.

Boundary Conditions and Moderators

Expected Ownership (Experiment 3):

• The physical > digital preference disappears for rental goods where future ownership is not expected
• Effect only occurs when consumers expect to own/keep the good

Identity Relevance (Experiment 4):

• The preference for physical goods is stronger when the product category is more relevant to consumer identity
• Star Wars fans showed greater physical preference for Star Wars movies

Need for Control (Experiment 5):

• Individual differences in need for control moderate the effect
• High need-for-control individuals show stronger physical preference
• Low need-for-control individuals show minimal format preference

Building on Previous Work

Extends Literature:

• Moves beyond qualitative observations of physical preference to empirical testing
• Provides systematic evidence across multiple product categories and value elicitation methods
• Tests competing explanations (permanence, consumption utility, production costs)

Challenges Assumptions:

• Contradicts rational economic predictions that digital goods should be valued equally or higher due to superior features
• Questions the assumption that convenience and functionality drive valuation

Theoretical Integration:

• Connects psychological ownership literature with digital consumption research
• Links perceived control mechanisms to ownership feelings and valuation

Major Theoretical Contribution

The paper makes three significant theoretical contributions:

1. Object-Oriented Determinants: Demonstrates that features of objects themselves (materiality) influence capacity for psychological ownership, expanding beyond previous focus on person-oriented determinants
2. Pre-Acquisition Ownership: Shows how anticipated psychological ownership affects valuation even before actual ownership occurs, extending understanding of when ownership feelings emerge
3. Control-Ownership Link: Establishes perceived control as a key mechanism linking physical properties to psychological ownership and subsequent valuation

Major Managerial Implications

Pricing Strategy:

• Physical and digital goods may warrant different pricing strategies reflecting their different perceived values
• Subscription/rental models may eliminate the physical preference, suggesting different approaches for access-based services

Product Design:

• Digital goods can be enhanced through design elements that increase perceived control and psychological ownership
• Skeuomorphism (making digital goods resemble physical ones) may increase valuation
• Interactive features and customization options could strengthen ownership feelings

Market Understanding:

• Explains persistent market preferences for physical goods despite digital advantages
• Suggests that complete digital substitution may face psychological barriers beyond functionality

Unexplored Theoretical Factors

Cultural Factors:

• Cross-cultural differences in materialism, collectivism, or relationship with possessions
• Cultural variations in control orientation and ownership concepts

Temporal Factors:

• Generational differences (digital natives vs. traditional consumers)
• Adaptation effects over time with increased digital exposure
• Temporal distance effects on ownership feelings

Product Category Factors:

• Hedonic vs. utilitarian goods differences
• Social visibility and signaling value variations
• Product involvement and expertise effects

Individual Difference Factors:

• Materialism and possession attachment tendencies
• Technology adoption patterns and digital comfort
• Regulatory focus (prevention vs. promotion orientation)

Contextual Factors:

• Social vs. private consumption contexts
• Gift-giving situations and their impact on format preferences
• Scarcity and exclusivity perceptions across formats

Process Factors:

• Role of haptic feedback vs. other sensory modalities
• Cognitive load and decision-making effort differences
• Memory and mental accounting differences for physical vs. digital purchases

Reference

Atasoy, Ozgun and Carey K Morewedge (2018), “Digital Goods Are Valued Less Than Physical Goods,” Journal of Consumer Research, 44 (6), 1343–57.