Pentrall Bros. is a seller of used automobiles. A research study conducted by the company indicates that customers are not willing to pay more than 70 percent of the market price of a new car for a used car. In light of this, the company makes sure that the prices of used cars are not set higher than 70 percent of the market value. In this scenario, Pentrall Bros. is trying to avoid _____.
A) the endowment effect
B) disposition
C) the sleeper effect
D) repositioning
E) product positioning

Question

Quizplus · Accepted Answer

Pentrall Bros. is trying to avoid the endowment effect, which is the tendency for people to overvalue goods they already own or possess. By ensuring that their prices are not set higher than 70 percent of the market value, Pentrall Bros. is acknowledging that customers are not willing to pay more than that amount for a used car, even if it is in good condition. This approach helps the company to avoid the potential negative impact of the endowment effect on their pricing strategy. Disposition, sleeper effect, repositioning, and product positioning are not relevant in this scenario.