We thank three very careful referees and the editor for asking some fundamental questions that lead to a quite different paper. Bob Aumann, Ted Bergstrom, Lorne Carmichael, Simon Gächter, Andras Löffler, Clemens Puppe, Frank Riedel, Bill Sandholm and seminar participants at the universities of Bonn, Tilburg, Uppsala, the Stockholm School of Economics and Penn State University contributed very helpful comments on an earlier version of this paper.
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Learning to like what you have – explaining the endowment effect†
Article first published online: 13 JUL 2005
DOI: 10.1111/j.1468-0297.2005.01015.x
Additional Information
How to Cite
Huck, S., Kirchsteiger, G. and Oechssler, J. (2005), Learning to like what you have – explaining the endowment effect. The Economic Journal, 115: 689–702. doi: 10.1111/j.1468-0297.2005.01015.x
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Publication History
- Issue published online: 13 JUL 2005
- Article first published online: 13 JUL 2005
- Date of receipt of first submission: February 2001 Date of receipt of final typescript: July 2004
- Abstract
- Article
- References
- Cited By
The endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it. The existence of this effect has been documented in numerous experiments. We attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect. The reason is that an endowment effect improves one's bargaining position in bilateral trades. We show that for a general class of evolutionary processes strictly positive endowment effects will survive in the long run.