Hypothetical bias is the common finding that hypothetical monetary values for “goods” are higher than real values. We extend this research to the domain of “bads” such as consumer and household choices made to avoid aversive outcomes (e.g., insurance). Previous evidence of hot-cold...

In 5 studies, the authors examined people's perceptions of the endowment effect, or the tendency to value an object more once one owns it. In the 1st 2 studies, the authors documented egocentric empathy gaps between owners and buyers regarding the endowment effect: Both owners and buyers...

Human behavior is not always consistent with standard rational choice predictions. The much-investigated variety of apparent deviations from rational choice predictions provides a promising arena for the merger of economics and biology. Although little is known about the extent to which other...

People tend to value objects more highly simply because they own them. Prior research indicates that people underestimate the impact of this endowment effect on both their own and other people's preferences. We show that underestimation of the endowment effect can lead to suboptimal behavior in...

A higher endowment of some good will typically cause an individual to place a lower value on increases (or decreases) in that endowment. This property, which we call diminishing marginal value, is a pervasive component of economists' beliefs about people's behavior. In ordinary markets "the more...