What is an endowment effect? O A. The tendency of individuals to value an item m

Question

What is an endowment effect? O A. The tendency of individuals to value an item more when they own it than when they do not. For example, many people would refuse to pay S5 for a simple O B. The tendency of individuals to feel entitled to certain items whether they own them or not. For example, many people cannot afford to buy their own home ° C. The tendency of individuals to value an item more when they must purchase it than when they receive it for free. For example, many people would refuse to 0 D. It is the theory of consumer behavior that predicts that consumers behave a certain way because of the attributes they are endowed with. For example, the coffee mug but would also refuse to sell a simple coffee mug they won in a contest for the same price even though they got it for free. however, as Americans, they feel entitled to home ownership. sell a coffee mug they paid $5 for but would gladly sell the same coffee mug if they won it in a contest and got it for free. theory predicts that people endowed with musical abilities will become singers or musicians.

Explanation / Answer

Option A.

Endowment effect is merely an emotional bias towards certain goods which they value more than its price. These goods would have been received freely in a contest or inherited from their parents and value it more because of emotional attachment they have developed towards it.

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