The endowment effect is the tendency for people to ascribe more value to an object simply because they own it, so that the minimum price they would accept to sell something they possess tends to be considerably higher than the price they would be willing to pay to acquire the same item if they did not already own it. The phenomenon was named by the economist Richard Thaler and was demonstrated experimentally in studies by Thaler, Daniel Kahneman and Jack Knetsch, notably one in which participants randomly given a coffee mug demanded roughly twice as much to give it up as other participants were willing to pay to obtain an identical mug. The effect is widely cited in behavioral economics as evidence against the standard economic assumption that willingness to pay and willingness to accept for the same good should be roughly equal, and it is closely linked to loss aversion.
Facts
Core ClaimEconomists had already noticed a comparable gap between what people demand to give up a good, willingness to accept, and what they will pay for it, willingness to pay, as early as the 1960s, before Richard Thaler named and popularized the pattern as the endowment effect in 1980. 1 First Described Year Classification
Type of Phenomenon Connections
Associated With
Kahneman, with Thaler and Knetsch, ran the classic mug-and-pen experiments demonstrating the endowment effect.
Omission bias has been used to help explain the endowment effect and status quo bias.
Source Wikipedia: Omission bias
In Branch
Sources
1. Wikipedia: Endowment effect
Wikimedia Foundationhistory subsection, WTP/WTA precedent
Psychologists first noted the difference between consumers' WTP and WTA as early as the 1960s.
lead section, naming sentence
The term endowment effect however was first explicitly coined in 1980 by the economist Richard Thaler
lead section, phenomenon-kind classification
In psychology and behavioral economics, the endowment effect, also known as divestiture aversion, is the finding that people are more likely to retain an object they own than acquire that same object when they do not own it.
View the Source Wikipedia: Omission bias
Wikimedia FoundationAssociated With: Omission Bias, lead sectionQuote, Associated With: Omission Bias, lead section
The bias is often showcased through the trolley problem and has also been described as an explanation for the endowment effect and status quo bias.
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