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Learning to Like What You Have - Explaining the Endowment Effect Author info | Abstract | Publisher info | Download info | Related research | Statistics Steffen Huck
Georg Kirchsteiger
Jörg Oechssler
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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.
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number
bgse5_2003.
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Length: 24
Date of creation: Mar 2003Date of revision:
Handle: RePEc:bon:bonedp:bgse5_2003Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=494
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Keywords: endowment effect ; evolution ; bargaining ; Other versions of this item:
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other D00 - Microeconomics - - General - - - General
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