What is the Endowment Effect?
The endowment effect is a cognitive bias which was first hypothesized by economist Richard Thaler. According to Thaler’s theory, people value an object more if their ownership is clearly established. The results of the endowment effect can sometimes be quite interesting, and being aware of the endowment effect can be very important whether you are buying or selling something. Numerous studies have been conducted to explore the endowment effect. In a classic study, people were asked to assess the value of coffee cups which had been given to them. Another group in the study was also asked to estimate the value of coffee cups, but these coffee cups were generic, rather than being owned by the subjects. The subjects who owned their coffee cups consistently valued them higher than the other subjects, and in some cases they said that they would prefer to keep their coffee cups, rather than selling them. This effect seems to apply specifically to objects. When people in a similar study were o
