Home » Economics » The Endowment Effect and Irreversibility

The Endowment Effect and Irreversibility

The (disputed) endowment effect in economics is the observed phenomenon where most people tend to value the same thing more once they own it than before they owned it.

http://en.wikipedia.org/wiki/Endowment_effect

This is one example of the cognitive value of irreversibility in economic transactions. The case of the endowment effect is a phenomenon where irreversiblity is sought to be maintained rather than obtained. Interestingly, the endowment effect seems to attenuate with a little education; those who understand that buying prices and selling prices ought to converge are more likely to thwart what otherwise seems like a default bias with human beings.

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