Asked by Kayla Driffin on Jul 15, 2024
Verified
Alex was willing to pay $50 for the new World Cup soccer ball. When he received it as a gift, he was willing to sell it, but for no less than $80. According to behavioral economists,
A) Alex's behavior is consistent with the endowment effect.
B) Alex's behavior is irrational because of inconsistent anchoring.
C) Alex should sell the ball if he's offered any amount over $50.
D) Alex's behavior is irrational because his frame has changed.
World Cup
An international football (soccer) competition held every four years among the national teams of FIFA member countries.
Behavioral Economists
Economists who study the impacts of psychological, cognitive, emotional, cultural, and social factors on economic decisions made by individuals and institutions.
- Acquire knowledge about the endowment effect as it pertains to behavioral economics.
Verified Answer
CN
carol numenJul 18, 2024
Final Answer :
A
Explanation :
The endowment effect describes a situation where people ascribe more value to things merely because they own them. Alex's increased valuation of the soccer ball once he owns it, from $50 to $80, is a classic example of this cognitive bias.
Learning Objectives
- Acquire knowledge about the endowment effect as it pertains to behavioral economics.