WilliamLMillerAug 15, 2025

1️⃣3️⃣ Endowment Effect
We overvalue what we already own.
It makes us cling to bad investments, outdated systems, deadweight possessions, and less effective policies.
Learning to value what is not — and may never be — wholly our own allows us to let go and make space for the better.

#CognitiveBias #EndowmentEffect #FreeWill #Economics #GrowthMindset #DecisionMaking #20postchallenge

Dennis Alexis Valin DittrichJul 11, 2023
Is the Endowment Effect Due to Incomparability? https://kevindorst.substack.com/p/is-the-endowment-effect-due-to-incomparability
"The #endowmentEffect is the finding that merely owning an item seems to make people value it more. It’s a problem for standard economic models, and helped spur the rise of #behavioralEconomics. But a simple generalization of those standard models—one that philosophers have long defended—can explain the empirical data."
Is the Endowment Effect Due to Incomparability?

Why vagueness in value leads to reluctance to trade

Stranger Apologies
Dennis Alexis Valin DittrichApr 11, 2023
Expected subjective value theory: A representation of decision under risk & certainty
https://doi.org/10.1016/j.jebo.2022.12.013
"…sheds new light on the computational origins & evolution of #risk attitudes & aversion to outcomes below reward expectation (reference point)
…delivers novel explanations of the #EndowmentEffect, the observed #heterogeneity in probability weighting functions, & the #AllaisParadox, all with fewer parameters & higher descriptive accuracy than #ProspectTheory."
https://www.tymula.com/agnieszka/wp-content/uploads/sites/3/2016/04/2018_ESVT_2018_09_26.pdf
Dennis Alexis Valin DittrichJan 12, 2023
http://pietroortoleva.com/papers/WTA-P.pdf
3 new facts that contradict standard theories:
* the endowment effect is unrelated to #LossAversion for risky prospects;
* WTA & WTP are largely uncorrelated;
* WTA & WTP are related to different, independent features of risk preferences.
…results contradict the standard explanation of the #EndowmentEffect in #BehavioralEconomics that it is due to an asymmetry in the treatment of gains and losses is manifest in loss aversion for risky prospects.
#BoundedRationality
Dennis Alexis Valin DittrichDec 24, 2022

The Endowment Effect in the General Population
https://bibliothek.wzb.eu/pdf/2022/ii22-204.pdf

A field experiment on the German SocioEconomic Panel reveals that the #EndowmentEffect is present in a representative population sample, with only 32% of respondents engaging in item exchange when given the opportunity. …also finds individual-level indications that the decision to trade is related to other economic decisions.
#ExperimentalEcon #BoundedRationality