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The Endowment Effect

In: Deconstructing Behavior, Choice, and Well-being

Author

Listed:
  • Edward R. Morey

    (University of Colorado)

Abstract

The endowment effect is the most studied quirk. You value a commodity more after you possess it. What you must be compensated to relinquish it (sell it) is of greater value than what you were willing to give up to possess it. The endowment effect changes your ordering of paths. Distinguish between an anticipated but unrealized endowment effect and an anticipated and realized one. The former, an incorrect belief, leads to flawed choosing; the latter does not. For years, loss aversion was the standard explanation for the endowment effect, cognitive dissonance was a distant second, and ownership/self was either rejected or not considered. In the last fifteen years, the ownership/self has emerged as the forerunner, at least in psychology, and it implies the loss is realized. If realized, for how long? And does it vary with what will be lost (e.g., car vs. spouse)? In closing, I consider whether NBT survives the common quirks.

Suggested Citation

  • Edward R. Morey, 2023. "The Endowment Effect," Springer Books, in: Deconstructing Behavior, Choice, and Well-being, chapter 0, pages 285-316, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-36712-0_9
    DOI: 10.1007/978-3-031-36712-0_9
    as

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