The Endowment Effect, Status Quo Bias and Loss Aversion: Rational Alternative Explanation

Dupont, Dominique Y. and Lee, Gabriel S. (January 2001) The Endowment Effect, Status Quo Bias and Loss Aversion: Rational Alternative Explanation. IHS Economics Series 92

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Abstract or Table of Contents

Abstract: The endowment effect, status quo bias, and loss aversion are robust and well documented results from experimental psychology. They introduce a wedge between the prices at which one is willing to sell or buy a good. The objective of this paper is to address this wedge. We show that the presence of asymmetric information in a rational-agent framework can account for the endowment effect, status quo bias and loss aversion as well as psychology-based explanations proposed in the past.;

Item Type: IHS Series
Keywords: 'Endowment effect' 'Status quo bias' 'Loss aversion' 'Asymmetric information' 'Bid/ask spread'
Classification Codes (e.g. JEL): D81, D82, G22
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 11 May 2016 05:22
URI: http://irihs.ihs.ac.at/id/eprint/1320

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