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Endowment effect theory, public goods and welfare

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  • Bischoff, Ivo
  • Meckl, Jürgen

Abstract

According to endowment effect theory, the observed difference between the willingness to pay for a good and the willingness to accept retribution payments for giving up that good can be caused either by a disutility from parting or by an extra ownership utility. We analyze the welfare implications of these two alternatives with special emphasis on the case where they are good specific. Within a two-sector general-equilibrium model, we show that the ownership-utility effect may cause welfare losses: allocation inefficiencies are to be expected particularly with the provision of public goods.

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  • Bischoff, Ivo & Meckl, Jürgen, 2008. "Endowment effect theory, public goods and welfare," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1768-1774, October.
    • Handle: RePEc:eee:soceco:v:37:y:2008:i:5:p:1768-1774
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    References listed on IDEAS

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    2. Pablo Pintos & Pedro Linares, 2016. "Assessing the EU ETS with an Integrated Model," Working Papers 01-2016, Economics for Energy.
    3. Thomas, Veronica L. & Yeh, Marie & Jewell, Robert D., 2015. "Enhancing valuation: the impact of self-congruence with a brand on the endowment effect," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 178-185.
    4. I. Lens & M. Pandelaere & L. Warlop, 2009. "The Role of Materialism in the Endowment Effect," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/578, Ghent University, Faculty of Economics and Business Administration.

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