Suppose you took a group of people and you gave half of the group a University of Auckland mug. The mugs are valued at $15.99 but the group is not (necessarily) aware of the price. All those who have a mug are called "sellers" while all those without a "mug" are buyers. Now you ask the buyers to name a maximum price at which they are willing to buy the cup. You ask the sellers to name a minimum price at which they are willing to sell a cup. It is highly likely that:
A) The average buying price is less than the average selling price; this is due to the endowment effect.
B) The average buying price is less than the average selling price; this is due to the sunk cost fallacy.
C) The average selling price is less than the average buying price; this is due to the endowment effect.
D) The average selling price is less than the average buying price; this is due to the sunk cost fallacy effect.

Question

Quizplus · Accepted Answer

The endowment effect is a psychological phenomenon where people ascribe more value to things merely because they own them. In this scenario, sellers are likely to demand a higher price than the buyers are willing to pay because they value the mug more, simply because it is theirs. This leads to the average selling price being higher than the average buying price.

Suppose You Took a Group of People and You Gave