Kate is attempting to sell her house for $260,000. Fred lives across the street in an identical house. Fred recently stated to his wife that Kate's house is probably worth only $250,000 but that once she sells her house, he would like to put their house on the market at $285,000 and then move into a condominium. Which one of the following behaviors applies to Fred?

Question

Quizplus · Accepted Answer

Fred's behavior is an example of the endowment effect, which occurs when individuals value something they own more highly than something they do not own, simply because they own it. In this case, Fred values his identical house more than Kate's, simply because it is his.

Kate Is Attempting to Sell Her House for $260,000