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Predicting Variation In Endowment Effect Magnitudes, Owen D. Jones, C. Jaeger, S. Brosnan, D. Levin
Predicting Variation In Endowment Effect Magnitudes, Owen D. Jones, C. Jaeger, S. Brosnan, D. Levin
Vanderbilt Law School Faculty Publications
Hundreds of studies demonstrate human cognitive biases that are both inconsistent with “rational” decisionmaking and puzzlingly patterned. One such bias, the “endowment effect” (also known as “reluctance to trade”), occurs when people instantly value an item they have just acquired at a much higher price than the maximum they would have paid to acquire it. This bias impedes a vast range of real-world transactions, making it important to understand. Prior studies have documented items that do or do not generate endowment effects, and have noted that the effects vary in magnitude. But none has predicted any of the substantial between-item …