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Learning to Like What You Have: Explaining the Endowment Effect

Steffen Huck, Georg Kirchsteiger () and Jörg Oechssler

No 5/2003, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

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 strictly positive endowment effects will survive in the long run.

Keywords: endowment effect; evolution; bargaining (search for similar items in EconPapers)
JEL-codes: C79 C73 D00 (search for similar items in EconPapers)
Date: 2003
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Related works:
Journal Article: Learning to like what you have - explaining the endowment effect (2005) Downloads
Working Paper: Learning to Like What You Have - Explaining the Endowment Effect (1997) Downloads
Working Paper: Learning to like what you have: Explaining the endowment effect (1997) Downloads
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