Economics Endowment Effect Questions
The psychological factors that contribute to the endowment effect include loss aversion, status quo bias, and ownership attachment. Loss aversion refers to the tendency of individuals to place a higher value on avoiding losses compared to acquiring gains. Status quo bias refers to the preference for maintaining the current state of ownership or possession. Ownership attachment refers to the emotional attachment individuals develop towards items they own, leading them to overvalue those items. These psychological factors collectively contribute to the endowment effect, where individuals tend to value items they possess more than identical items they do not possess.