The endowment effect, status quo bias and loss aversion: Rational alternative explanation

The endowment effect, status quo bias, and loss aversion are robust and well documented results from experimental psychology. They introduce a wedge between the prices at which one is willing to sell or buy a good. The objective of this paper is to address this wedge. We show that the presence of asymmetric information in a rational-agent framework can account for the endowment effect, status quo bias and loss aversion as well as psychology-based explanations proposed in the past.

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Year of publication:	2001
Authors:	Dupont, Dominique Y. ; Lee, Gabriel S.
Publisher:	Vienna : Institute for Advanced Studies (IHS)
Subject:	Willingness to pay \| Risikoaversion \| Rationale Erwartung \| Asymmetrische Information \| Theorie \| endowment effect \| status quo bias \| loss aversion \| asymmetric information \| bid/ask spread

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Series:	Reihe Ökonomie / Economics Series ; 92
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	740118285 [GVK] hdl:10419/71256 [Handle] RePEc:ihs:ihsesp:92 [RePEc]
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; D82 - Asymmetric and Private Information ; G22 - Insurance; Insurance Companies
Source:	EconStor

Persistent link: https://ebvufind01.dmz1.zbw.eu/10010292793