Yesterday, Krista stated that Overland stock was only worth $12 a share and since it was selling for $15 a share, she declared it overpriced and refused to buy any shares. This morning, she learned that she is inheriting 3,500 shares of Overland stock from her grandmother. Suddenly, she is saying that Overland stock is a great buy at $15 and is probably worth at least $17 a share. This is an example of which one of the following?

Question

Quizplus · Accepted Answer

The endowment effect is the tendency to overvalue something simply because we own it. In this case, Krista did not want to buy Overland stock at $15 because she believed it was overpriced, but now that she is inheriting it, she sees it as a great buy at that price. Her perception of the stock's value has shifted simply because she now owns it.

Yesterday, Krista Stated That Overland Stock Was Only Worth $12