The endowment effect is:
A) The difference in willingness to pay and willingness to accept when there should not be a difference.
B) Always in violation of the rational model.
C) Describes the bias of individuals endowed with more money.
D) An increase in utility from more income.

Question

Quizplus · Accepted Answer

The endowment effect refers to a situation where people value something they own more than something they do not own, even if the items are identical. This leads to a discrepancy between the amount they are willing to pay to acquire an item and the amount they are willing to accept to give it up, even when there should be no difference according to standard economic theory.

The Endowment Effect Is