In behavioral economics, the endowment effect refers to the fact that
A)most people believe that most wealthy people inherit their wealth.
B)many people would be indifferent between being endowed with money or knowledge.
C)many people place a higher value on what they own than the same item they are considering purchasing.
D)most people respond to tax incentives to provide an endowment for their children.

Question

Quizplus · Accepted Answer

The endowment effect in behavioral economics refers to the tendency for people to value something they already possess more than they would if they didn't own it. This means that when considering purchasing an item they already own, they may be willing to pay more for it than they would if they didn't own it. Therefore, option C is the correct choice. Option A is incorrect because the endowment effect is not related to beliefs about wealthy people inheriting their wealth. Option B is incorrect because it is not a comparison of different types of endowments, and Option D is incorrect because the endowment effect is not related to tax incentives for children.

In Behavioral Economics, the Endowment Effect Refers to the Fact