Sunk ‘Decision Points’: a theory of the endowment effect and present bias

Peter Landry ()
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Peter Landry: University of Toronto

Theory and Decision, 2019, vol. 86, issue 1, No 2, 23-39

Abstract: Abstract This paper presents a very simple model in which situational cues associated with a particular consumption good compel an agent—who may have otherwise been “thinking about” something else—to consider the decision to consume that good. Within this framework, it is shown how an endowment effect and a present bias can arise through a common mechanism. The analysis points to a novel, contributing role for inattention (of a particular form) in understanding both of these behavioral anomalies while also speaking to evidence that they are often cue-induced.

Keywords: (In)attention; Cues; Present bias; Endowment effect (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:kap:theord:v:86:y:2019:i:1:d:10.1007_s11238-018-9673-9

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DOI: 10.1007/s11238-018-9673-9

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