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The endowment effect is characterized by increased positive emotions toward the object Endowment effect in a dictionary of psychology » [coined in 1980 by u.s
Psychology definition of endowment effect Also called status quo bias The tendency a person has to place a higher value on items they possess.
What is the endowment effect
The endowment effect is a psychological bias where ownership leads individuals to overvalue their possessions, often disregarding their market price. Abstract the endowment effect is the tendency for people who own a good to value it more than people who do not Its economic impact is consequential It creates market inefficiencies and irregularities in valuation such as differences between buyers and sellers, reluctance to trade, and mere ownership effects.
The leading explanation for the endowment effect is loss aversion for the object. A trusted reference in the field of psychology, offering more than 25,000 clear and authoritative entries. The endowment effect, also frequently referred to as divestiture aversion, describes a robust cognitive bias wherein individuals ascribe a disproportionately higher value to items they own compared to identical items they do not own. The phenomenon is closely related to loss aversion, and it shows that preferences must be understood in relation to status quo reference points, as in prospect theory
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