The Group: Lidiia Shvedova, Margarita Salnikova, Emel Shakhin, Zoe Katchynsky
Carey K. Morewedge — Research Analysis
About the researcher
Carey K. Morewedge is a professor of marketing at the Questrom School of Business at Boston University. His research focuses broadly on consumer psychology and judgment and decision-making, particularly on how psychological processes influence the way people perceive, value, and make decisions about products and possessions.
For this assignment, we focus on his research on psychological ownership and consumer valuation.
The study we selected is:
“Digital Goods Are Valued Less Than Physical Goods”
Ozgun Atasoy & Carey K. Morewedge
The paper investigates a very relevant question for modern companies: Why do consumers often value a physical product more than an equivalent digital version, even when the digital version provides essentially the same content?
1. What did he study? — One concept / idea
The central concept of the research is psychological ownership.
Psychological ownership is the feeling that something is “mine,” even beyond legal ownership. Morewedge and Atasoy argue that physical products have a greater capacity to create this feeling than digital products.
Their reasoning is based particularly on perceived control. A physical object can be held, touched, moved, displayed, stored, or manipulated directly. These interactions make it easier for consumers to perceive control over the object and develop a connection between the product and themselves.
A digital object is less tangible. As a result, it may be more difficult for consumers to develop the same degree of psychological ownership.
The central mechanism can therefore be summarized as:
Physical format → greater perceived control → stronger psychological ownership → higher perceived value
Importantly, the researchers argue that this process can begin before consumers actually acquire the product. When deciding whether to buy something, consumers can already anticipate how much the product will feel like “theirs,” and this anticipated ownership affects how much they are willing to pay for it.
2. Why is it interesting for a company?
This question is particularly important because companies are increasingly replacing or complementing physical products with digital alternatives.
Books become e-books, DVDs become digital movies, printed photographs become digital files, and ownership itself is increasingly replaced by digital access and subscription models.
Digital products have many obvious advantages. They can often be distributed instantly, stored easily, accessed anywhere, and reproduced at very low marginal cost. Nevertheless, the research identifies a potential problem:
Consumers may still perceive the digital version as less valuable than the physical version.
This means that a company cannot automatically assume that consumers will assign the same value to two products simply because they provide the same content or functional utility.
The research is therefore useful for decisions concerning pricing, product design, digitalization, customer experience, and business models.
It is especially valuable because it does more than identify a physical-versus-digital difference. It explains why the difference occurs. If psychological ownership is part of the problem, companies can potentially redesign digital experiences to increase this feeling of ownership.
3. What did they identify? What is the main result?
The main finding is very clear:
Consumers value physical goods more than equivalent digital goods.
Atasoy and Morewedge demonstrated this across five experiments using different products and different measures of value, including souvenir photographs, books, movies, and textbooks. They measured actual payments, willingness to pay, and purchase intentions.
One particularly interesting experiment was conducted with tourists at the Old North Church in Boston. Tourists received either a physical instant photograph or a digital photograph of themselves with a person dressed as Paul Revere. They could then pay whatever they wanted for the photograph.
The median payment was:
Physical photograph: $3
Digital photograph: $1
This was especially interesting because the photographs had no resale value, and participants estimated essentially identical production costs for the two formats. Therefore, those factors could not explain the difference.
The researchers then replicated the general effect with more conventional consumer products.
In Experiment 2, consumers were willing to pay, on average:
$9.30 for physical goods versus $5.96 for digital goods.
They tested books and movies, and the physical-format advantage appeared for both.
However, the most important result is not simply that physical > digital.
The researchers found evidence that psychological ownership explains part of this difference.
Participants reported substantially greater psychological ownership for physical goods:
Physical: 6.04 / 7
Digital: 4.69 / 7
The mediation analysis showed that stronger psychological ownership contributed to the higher willingness to pay for physical products.
The authors also investigated alternative explanations. For example, perhaps people prefer physical goods simply because they think they last longer, cost more to manufacture, can be resold, or are more enjoyable to consume.
The experiments tested several of these possibilities, including production cost, resale value, permanence, consumption enjoyment, and retail price. None explained the physical-versus-digital valuation difference in the same way as psychological ownership.
An important academic nuance is that psychological ownership partially, not completely, mediated the effect. So the researchers do not claim that it is the only possible explanation. Other mechanisms may also contribute.
4. Managerial implications
The most important managerial implication is:
If digital goods suffer from weaker psychological ownership, companies should design digital experiences that make consumers feel more ownership and control.
The authors specifically suggest increasing consumers’ interaction and control over digital products.
For example, companies could introduce greater customization and personalization, allowing consumers to modify a digital product and make it more individual. The reasoning is that investing effort and making personal choices can strengthen the association between the product and the self.
Digital interfaces can also be designed to create a stronger sense of control and possession. The authors discuss elements that make digital objects resemble or behave more like physical objects and opportunities for consumers to interact directly with digital goods.
So instead of thinking only:
“How can we make the digital product more convenient?”
a company should also consider:
“How can we make this digital product feel more like the consumer’s own possession?”
This changes the managerial perspective from purely functional product design to psychological product design.
There is another particularly interesting managerial implication concerning subscriptions and rentals.
The researchers found that the physical-format advantage largely disappeared when participants were considering renting rather than buying a textbook.
Participants were willing to pay substantially more to buy a physical textbook than a digital textbook, but when they were only renting the textbook, the difference between physical and digital formats was not statistically significant.
This suggests that companies operating rental or subscription models may have less reason to invest in physical formats purely to create additional perceived ownership value. When consumers expect temporary access rather than permanent possession, the psychological advantage of physical products becomes much smaller.
5. Boundary conditions
One of the strongest aspects of this paper is that Morewedge and Atasoy do not argue that consumers always value physical goods more.
They identify conditions under which the effect becomes stronger, weaker, or disappears.
Boundary condition 1 — Expected ownership
The first boundary condition is whether consumers actually expect to own the product.
In Experiment 3, students considered either buying or renting a physical or digital textbook.
When buying, participants were willing to pay:
Physical textbook: $87.81
Digital textbook: $44.90
This is a very large difference.
But when renting:
Physical textbook: $58.97
Digital textbook: $47.17
The physical-versus-digital difference was no longer statistically significant.
This supports the psychological ownership explanation: if consumers know that they will eventually return the product, the feeling of ownership becomes less relevant, and the advantage of physicality decreases.
Boundary condition 2 — Identity relevance
The second condition is whether the product is connected to the consumer’s identity.
The researchers used Star Wars in Experiment 4.
Participants evaluated either a DVD or a digital copy of The Empire Strikes Back. The researchers also measured how strongly participants considered Star Wars to be part of their identity.
The more strongly a participant identified with Star Wars, the greater the preference for the physical copy over the digital copy.
For consumers who did not strongly identify with Star Wars, the difference essentially disappeared.
This makes theoretical sense because psychological ownership creates a connection between an object and the self. If a product is personally meaningful — for example, something related to a person’s interests, passions, community, or identity — having a tangible object may become especially valuable.
This has an obvious application to collectibles, fandoms, luxury goods, fashion, art, sports merchandise, limited editions, and other identity-expressive products.
Boundary condition 3 — Need for control
The third boundary condition concerns an individual characteristic: need for control.
The researchers proposed that physical objects create stronger psychological ownership partly because consumers feel they have more control over them.
Experiment 5 supported this mechanism.
Consumers with a higher need for control showed a stronger difference in psychological ownership between physical and digital products. This stronger psychological ownership then contributed to a greater difference in willingness to pay.
In other words:
The more important control is to a consumer, the more important physicality can become.
This provides additional evidence that perceived control is one of the psychological foundations of the physical-product advantage.
Conclusion
The central contribution of Morewedge and Atasoy’s research is not simply the observation that people prefer physical products.
Their deeper contribution is explaining the psychological mechanism behind that preference.
Consumers can value physical goods more because physical objects are easier to control, interact with, and psychologically incorporate into the self. This creates stronger psychological ownership, which increases perceived value and willingness to pay.
The research can be summarized through one simple chain:
Physicality → Control → “It feels like mine” → Higher value
However, this effect has clear boundaries. It becomes weaker when consumers rent rather than own, stronger when products are relevant to their identity, and stronger for consumers with a greater need for control.
For managers, the implication is therefore not simply “physical products are better.” The more useful conclusion is that companies selling digital goods should think carefully about how to create control, personalization, identity connection, and psychological ownership in digital environments.
That is what makes the study particularly relevant for modern companies: as consumption becomes increasingly digital, understanding how to make an intangible product feel like a real possession may directly influence how much consumers are willing to value and pay for it.