New Frontiers in Behavioural Science: Beyond mugs and wine – Expanding our understanding of the endowment effect

Looks at the endowment effect and what factors seem to strengthen or weaken it or whether context matters.

“A wine-loving economist we know purchased some nice Bordeaux wines years ago at low prices. The wines have greatly appreciated in value, so that a bottle that cost only $10 when purchased would now fetch $200 at auction. This economist now drinks some of this wine occasionally, but would neither be willing to sell the wine at the auction price nor buy an additional bottle at that price.”1

Introduction

The story above is an example of endowment effect: someone who owns a good will value it more than someone who does not. Behavioural economist Richard Thaler coined the term...

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