What is an example of an endowment effect?
A) Mark paid $3,100 for a used car that he values at $4,000. Recently, Mark was offered $4,400 for the car but refuses to sell it.
B) Sammy receives increasing marginal utility as his 401K plan increases.
C) Toby prefers a guaranteed $200 to a gamble with an expected value of $200.
D) Deana refuses to transfer money from her checking account into her savings account, even though she has paid all her monthly bills.

Question

Quizplus · Accepted Answer

The endowment effect is the tendency for individuals to place a higher value on an item they already own compared to the same item that they do not own. In this example, Mark values his used car at $4,000, but refuses an offer of $4,400, indicating that he is placing a higher value on the car simply because he owns it.

What Is an Example of an Endowment Effect