Endowment effect

The tendency to value an item more once one owns it, often demanding more to give it up than one would pay to acquire it.

Loss aversion: The tendency for losses to have greater psychological impact than equivalent gains. Giving up an owned item feels like a loss, which can raise its perceived value.
Mug experiment: A class of experiments comparing owners' selling prices for mugs with nonowners' buying prices. Classic demonstrations found owners demanded more for ordinary mugs than buyers would pay.
Richard Thaler: An American economist whose work helped establish behavioral economics and its account of ownership-related valuation. Thaler named the endowment effect and connected it to loss aversion.
Mere ownership effect: The increase in liking or evaluation that can result simply from possessing an object. It overlaps with the endowment effect but concerns positive evaluation, not necessarily exchange prices.
Behavioral economics: The study of how psychological factors influence economic decisions and market outcomes. The endowment effect is a standard example of systematic departures from stable-value models.
Reference dependence: The tendency to evaluate outcomes relative to a reference point rather than by final wealth alone. Ownership makes the current holding a reference point for evaluating a trade.
Willingness to accept: The minimum compensation someone requires to give up a good or accept an outcome. The endowment effect is often measured by comparing this amount with willingness to pay.
Daniel Kahneman: An Israeli-American psychologist whose research on judgment and choice reshaped economics. Kahneman helped investigate the effect experimentally with Jack Knetsch and Thaler.
Commodity theory: A theory that scarcity can increase an object's perceived value and desirability. Scarcity can raise value independently of whether the evaluator owns the object.
Property rights: Rules defining who may use, control, transfer, or exclude others from resources. Assigned rights can affect bargaining by changing which party experiences a transfer as a loss.

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