Asked by Austin Collins on Jul 16, 2024
Verified
According to the "endowment effect:"
A) people are willing to pay more for things they don't own than they would have to receive to give up something they already have.
B) people feel gains and losses with equal intensity.
C) people assign higher values to things they own than things they don't.
D) the intensity of feelings from gains and losses depends on how much wealth one possesses.
Endowment Effect
The phenomenon where individuals value an owned item more than a similar item they do not own.
Gains
An increase in wealth, utility, or value resulting from an economic transaction or activity.
Losses
The shortfall that occurs when total costs exceed total revenues in a business operation, resulting in negative profit.
- Identify the impact of framing, anchoring, and the endowment effect on financial decision-making.
Verified Answer
JD
Jefferson De GuzmanJul 20, 2024
Final Answer :
C
Explanation :
The endowment effect suggests that people assign higher values to things they own than things they don't. This means that if someone has a possession, they will likely place a higher value on it than if they did not own it. This can also influence their willingness to part with said possession, as they may require more compensation to give it up than they would be willing to pay for it if they did not own it.
Learning Objectives
- Identify the impact of framing, anchoring, and the endowment effect on financial decision-making.