Quotes About Endowment effect

people are more likely to keep what they start with than to trade it, even when the initial allocations were done at random.

Quitting is hard, too hard to do entirely on our own. We as individuals are riddled by the host of biases, like the sunk cost fallacy, endowment effect, status quo bias, and loss aversion, which lead to escalation of commitment. Our identities are entwined in the things that we're doing. Our instinct is to want to protect that identity, making us stick to things even more.

The endowment and sunk cost effects live together in a way that amplifies escalation of commitment. Status quo bias adds to the mix of cognitive forces gaffing the scale.

When we own something, we value it more highly than an identical item that we do not own. Richard Thaler was the first to name this cognitive illusion, calling it the endowment effect. In fact, he introduced the endowment effect in that same 1980 paper where he coined the term "sunk cost." He described the endowment effect as "the fact that people often demand more to give up an object than they would be willing to pay to acquire it.

The endowment effect has obvious applications to quitting behavior. Selling something you own is the equivalent of quitting; you are quitting your ownership. Not selling something you own is a form of persistence. When you are deciding whether to sell your wine, or your car, or your house, you are choosing whether or not to persist in owning those things.

The endowment effect helps unlock the mystery of why Harold Staw twice would not sell his stores. In his battle with the Texas shareholders, in which his good friend and lawyer defected to the other side, he was endowed to the California stores in a way that those on the other side of the suit were not. He was unwilling to sell the California stores, stores he had created and built, to protect the value of the Texas stores, stores he had not created and built.

As you build things, whether they're train tracks, or bookshelves, or relationships, or essays that you've written for classes, the endowment effect gaffs the scale even more, further escalating our commitment to failing causes.

In essence, the endowment effect is really just another manifestation of loss aversion: People

Psychologists talk of the 'endowment effect' – that we are more concerned about losing things than gaining them. Once we own something, we are averse to losing it, even if we are offered something of greater value in exchange.

You think a thing has more value simply because it belongs to you. Experts called behavioral economists have noted an issue they call the endowment effect, Dr. Tolin says. Merely owning an item causes you to exaggerate its value, or "endow" it with more worth.