Asked by shivangi thakur on Jul 15, 2024
Verified
Riley has a new tennis racket for which she paid $75. Haley would like to buy the racket from Riley. Assuming Riley's decision is only influenced by the endowment effect, which of the following amounts would most likely represent how much Riley would have to receive to be willing to sell the racket?
A) $75
B) $100
C) $50
D) $20
Endowment Effect
Refers to the phenomenon where people ascribe more value to things merely because they own them.
- Understand how the notions of fairness and the endowment effect impact economic decision-making.
Verified Answer
SA
Sanchita AgarwalJul 19, 2024
Final Answer :
B
Explanation :
The endowment effect is a psychological phenomenon where people ascribe more value to things merely because they own them. Therefore, Riley is likely to demand more than the $75 she paid for the tennis racket to be willing to sell it.
Learning Objectives
- Understand how the notions of fairness and the endowment effect impact economic decision-making.