The Endowment Effect: the psychology of ownership

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This phenomenon is an example of the endowment effect, a cognitive bias, which was coined by Richard Thaler, the economist, in the 1990s (though the effect had been observed to some extent in other experiments in the 1960s). Working with Daniel Kahneman, the Nobel prize winner, and Jack Knetsch, another economist, they determined that if someone was given a mug and then offered to sell it or trade it for an equally valued item, they typically demanded twice as much as the value of a mug they now owned than they had valued the mug at when they did not own that mug.

Daniel Kahneman proposed that this is because human beings are loss-averse and that giving up something you own is a form of loss.

Under consideration Suggested by: jonas Upvoted: 02 Feb Comments: 0

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