Enhance Your Learning with Economics - Endowment Effect Flash Cards for quick understanding
The tendency for individuals to value an item they already possess higher than the same item when they do not own it.
The concept that people tend to strongly prefer avoiding losses over acquiring gains, leading to irrational decision-making.
A field of study that combines psychology and economics to understand how individuals make economic decisions and how they deviate from rationality.
An Israeli-American psychologist and Nobel laureate known for his work in behavioral economics and prospect theory.
An Israeli cognitive and mathematical psychologist, known for his collaboration with Daniel Kahneman on cognitive biases and decision-making.
A theory in behavioral economics that describes how people make decisions under uncertainty, emphasizing the role of loss aversion and reference points.
A standard or benchmark against which individuals evaluate outcomes and make decisions, often influenced by their current circumstances or past experiences.
The tendency for individuals to prefer the current state of affairs and resist change, even when the change may be beneficial.
A commonly used experimental method to study the endowment effect, where participants are randomly assigned to either receive an item or not, and then asked to value it.
The minimum amount of compensation an individual is willing to accept in exchange for giving up an item they already possess.
The maximum amount of money an individual is willing to pay to acquire an item they do not currently possess.
The existing state of affairs or the current condition, which individuals tend to favor and maintain.
The design of decision-making environments to influence individuals' choices, often used to nudge people towards certain decisions without restricting their freedom of choice.
The cognitive bias where individuals rely too heavily on the first piece of information encountered (the anchor) when making decisions.
The tendency for individuals to seek, interpret, and remember information that confirms their preexisting beliefs or hypotheses.
The mental shortcut where individuals make judgments based on the ease with which examples or instances come to mind.
The tendency for individuals to continue investing in a project or decision based on the resources (time, money, effort) they have already committed, even when the costs outweigh the benefits.
The phenomenon where having too many options can lead to decision paralysis or dissatisfaction with the chosen option.
The cognitive bias where individuals' decisions are influenced by how information is presented or framed.
A framing that emphasizes the potential losses or negative consequences associated with a decision or action.
A framing that emphasizes the potential gains or positive outcomes associated with a decision or action.
The process of breaking down a complex decision into smaller, more manageable choices or steps.
The tendency for individuals to prefer smaller immediate rewards over larger delayed rewards, even if the latter would result in greater overall benefit.
The decision-making process that involves choosing between options that offer different benefits or costs at different points in time.
The psychological phenomenon where individuals categorize and treat money differently based on factors such as its source, intended use, or emotional significance.
The range of options or alternatives available to an individual when making a decision.
The pre-selected or automatic choice that individuals are presented with if they do not actively make a decision.
The concept that small changes in the presentation or framing of choices can significantly impact individuals' decisions and behaviors.
The state of being unable to make a decision due to being overwhelmed by the number of available options.
The deteriorating quality of decisions made by individuals after a long period of decision-making or when faced with numerous choices.
Mental shortcuts or rules of thumb that individuals use to simplify decision-making and problem-solving.
The concept that individuals have limited cognitive abilities and resources, leading to decision-making that is rational within certain constraints.
A framework in economics that assumes individuals make decisions based on rational calculations, weighing the costs and benefits of different options.
Systematic patterns of deviation from rationality in judgment and decision-making, often influenced by heuristics and social factors.
The tendency for individuals to overestimate their own abilities, knowledge, or the accuracy of their judgments.
The application of the endowment effect in marketing strategies, such as offering free trials or samples to create a sense of ownership and increase perceived value.
The influence of the endowment effect on negotiation outcomes, where individuals tend to demand higher prices for items they own and value more.
The impact of the endowment effect on consumer decision-making, where individuals may be more reluctant to give up items they already possess, even if better alternatives are available.
The presence of the endowment effect in financial markets, where investors may hold onto losing investments longer than rationality would suggest, due to the attachment to their initial ownership.
The consideration of the endowment effect in designing public policies, such as the framing of taxes or subsidies to account for individuals' attachment to their current possessions.
The comparison between the endowment effect and the Coase theorem, which suggests that in the absence of transaction costs, the initial allocation of property rights does not affect the final outcome.
The distinction between the endowment effect and loss aversion, where the former focuses on the valuation of owned items, while the latter emphasizes the aversion to losses in general.
The differentiation between the endowment effect and the sunk cost fallacy, where the former relates to the attachment to owned items, while the latter refers to the irrational consideration of past costs in decision-making.
The comparison between the endowment effect and the status quo bias, where the former relates to the valuation of owned items, while the latter refers to the preference for the current state of affairs.
The distinction between the endowment effect and the framing effect, where the former focuses on the valuation of owned items, while the latter relates to the influence of presentation or framing on decision-making.
The comparison between the endowment effect and the anchoring effect, where the former relates to the valuation of owned items, while the latter refers to the influence of an initial anchor on subsequent judgments or decisions.
The differentiation between the endowment effect and confirmation bias, where the former relates to the valuation of owned items, while the latter refers to the tendency to seek and interpret information that confirms preexisting beliefs.
The comparison between the endowment effect and the availability heuristic, where the former relates to the valuation of owned items, while the latter refers to the reliance on easily accessible examples or instances when making judgments.
The distinction between the endowment effect and hyperbolic discounting, where the former relates to the valuation of owned items, while the latter refers to the preference for immediate rewards over delayed rewards.
The comparison between the endowment effect and choice overload, where the former relates to the valuation of owned items, while the latter refers to the difficulty in making a decision when faced with too many options.
The differentiation between the endowment effect and nudge theory, where the former relates to the valuation of owned items, while the latter refers to the use of subtle interventions to influence decision-making.
The comparison between the endowment effect and bounded rationality, where the former relates to the valuation of owned items, while the latter refers to the limitations in decision-making due to cognitive constraints.
The distinction between the endowment effect and rational choice theory, where the former relates to the valuation of owned items, while the latter assumes individuals make decisions based on rational calculations.
The comparison between the endowment effect and cognitive biases, where the former relates to the valuation of owned items, while the latter refers to systematic patterns of deviation from rationality in decision-making.
The differentiation between the endowment effect and overconfidence bias, where the former relates to the valuation of owned items, while the latter refers to the tendency to overestimate one's own abilities or knowledge.