Last week, Alicia stated that ABC stock was only worth $16 a share and since it was selling for $23 a share, she declared it overpriced refusing to buy. After inheriting 1,000 shares of ABC stock from her grandmother, Alicia is suddenly saying that ABC stock is a great buy at $23 and is probably worth at least $31 a share. This is an example of the:

Question

Quizplus · Accepted Answer

The change in Alicia's valuation of ABC stock after inheriting it is an example of the endowment effect, which is the tendency for people to place a higher value on something they own compared to the same item when they do not own it. This is why Alicia now sees the stock as worth more than she did before inheriting it.

Last Week, Alicia Stated That ABC Stock Was Only Worth