What have we learnt about Loss Aversion and Endowment Effects? Still an anomaly?

Patricio Dalton ()

Microeconomics from University Library of Munich, Germany

Abstract: This paper presents an insight into the theoretical and empirical literature of Loss Aversion and Endowment Effect. The definition and conceptualisation of both ideas is introduced in order to define a framework for further analysis. Their presence implies a radical change in some of the basic standard postulates of microeconomic foundation. These concepts robustly predict a divergence between Willingness to Accept and Willingness to Pay, even in a perfect-market framework and invalidate the standard assumptions of transitivity and reversibility of preferences under the neoclassical theory of consumer choice. Twenty years of successive positive evidence on Loss Aversion and Endowment Effect support the theoretical implications showed in this paper. I conclude that Loss Aversion and Endowment Effects truly matter and their existence must not be taken into account just as an anomaly or puzzle, but as part of a new theory in itself, leading to new questions and challenges for future economic research.

Keywords: Loss Aversion; Endowment Effects; WTA; WTP; Anomalies (search for similar items in EconPapers)
JEL-codes: A12 C91 C92 D11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2003-07-09
New Economics Papers: this item is included in nep-dcm and nep-mic
Note: Type of Document - Acrobat PDF; prepared on PC; to print on HP A4; pages: 27 ; figures: included. 27 pages, pdf, figures included in the document
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0307/0307005.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpmi:0307005

Access Statistics for this paper

More papers in Microeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).