Endowment effect theory, public goods and welfare

Ivo Bischoff () and Jürgen Meckl

The Journal of Socio-Economics, 2008, vol. 37, issue 5, pages 1768-1774

Abstract: According to endowment effect theory, the observed difference between the willingness to pay for a good and the willingness to accept retribution payments for giving up that good can be caused either by a disutility from parting or by an extra ownership utility. We analyze the welfare implications of these two alternatives with special emphasis on the case where they are good specific. Within a two-sector general-equilibrium model, we show that the ownership-utility effect may cause welfare losses: allocation inefficiencies are to be expected particularly with the provision of public goods.

Keywords: Endowment; effect; Public; goods; Economic; welfare (search for similar items in EconPapers)
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:eee:soceco:v:37:y:2008:i:5:p:1768-1774

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