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

D.Y. Dupont; Gabriel S. Lee

doi:10.1023/A:1016371414952

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

D.Y. Dupont, Gabriel S. Lee

Research output: Contribution to journal › Article › Academic › peer-review

17 Citations (Scopus)

Abstract

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 also account for the endowment effect, status quo bias and loss aversion without invoking psychology-based explanations proposed in the past.

Original language	English
Pages (from-to)	87-101
Journal	Journal of risk and uncertainty
Volume	25
Issue number	1
DOIs	https://doi.org/10.1023/A:1016371414952
Publication status	Published - 2002

Keywords

Endowment effect
loss aversion
bid/ask spread
IR-43298
status quo bias
METIS-206316
asymmetric information

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10.1023/A:1016371414952

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KW - bid/ask spread

KW - IR-43298

KW - status quo bias

KW - METIS-206316

KW - asymmetric information

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

Abstract

Keywords

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