Learning to Like What You Have - Explaining the Endowment Effect

Steffen Huck, Georg Kirchsteiger and Jörg Oechssler

Game Theory and Information from University Library of Munich, Germany

Abstract: The endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it. The existence of this effect has been documented in numerous experiments. We attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect. The reason is that an endowment effect improves one's bargaining position in bilateral trades. We show that for a general class of evolutionary processes almost all individuals will have a strictly positive and finite endowment effect.

JEL-codes: C73 (search for similar items in EconPapers)
Date: 1997-02-06, Revised 1997-05-15
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Learning to like what you have - explaining the endowment effect (2005)
Working Paper: Learning to Like What You Have: Explaining the Endowment Effect (2003)
Working Paper: Learning to like what you have: Explaining the endowment effect (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9702001

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