Suppose Adam Einberg pays $100 for a ticket to a new Broadway play and $100 was the maximum price he was willing to pay.On the day of the performance of the play Adam refuses to sell the ticket for $150.How would behavioral economists explain Adam's refusal to sell his ticket?
A)Adam's tastes had changed from the time he bought the ticket to the time of the performance of the play.
B)When Adam bought the ticket he was being unrealistic about his future behavior.
C)The endowment effect explains Adam's actions. People like Adam seem to value things that they have more than the things they do not have.
D)Adam's income probably increased between the time he bought the ticket and the day of the play's performance.

Question

Quizplus · Accepted Answer

The endowment effect, which behavioral economists have studied, explains Adam's behavior. The effect states that people tend to value things that they own or possess more than the things they don't have. Since Adam owns the ticket, he is likely to overvalue it and refuse to sell it for a price higher than what he paid for it.

Suppose Adam Einberg Pays $100 for a Ticket to a New