Suppose your instructor gave hats with your school's logo to half of your economics classmates. She then asked these students to value the hats, and the average response was $9 per hat. Under the endowment effect, we should expect that the average value assigned by the economics students who did NOT receive the hats to be:
A) higher.
B) lower.
C) the same.
D) We cannot answer this question without knowing more about the risk preferences of the students.

Question

Quizplus · Accepted Answer

The endowment effect predicts that individuals assign higher value to an object they already possess, simply because they possess it. Therefore, the students who did not receive the hats are likely to assign a lower value to the hats than the students who did receive the hats.

Suppose Your Instructor Gave Hats with Your School's Logo to Half