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The Indifferent, the Good Samaritan, the Brave and the Agent in Allais Paradox situation – or How Endowment Effect Influences Our Decision in Case of Allais Paradox?

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  • Kolnhofer-Derecskei Anita

    (Obuda University, Faculty of Business and Management, Budapest, Hungary)

Abstract

Background and purpose: Mainstream economic models do not take ownership into consideration. Only after the findings of behavioural economists was endowment effect widely observed. Endowment effect means that goods that one owns are valued higher than other goods not held in endowment. At the same time the principal-agent literature is concerned with how the principal (such as employer) can motivate his agent (say the employee), to act in the principal’s interests and also for their holdings. The main problem is that acting in somebody’s else’s interests can influence our values as well. Moreover, the principal as owner suffers from endowment effect. Both situations can be treated as a risky decision. Risk confuses our rationality in a predictable way.

Suggested Citation

  • Kolnhofer-Derecskei Anita, 2017. "The Indifferent, the Good Samaritan, the Brave and the Agent in Allais Paradox situation – or How Endowment Effect Influences Our Decision in Case of Allais Paradox?," Organizacija, Sciendo, vol. 50(4), pages 299-313, December.
    • Handle: RePEc:vrs:organi:v:50:y:2017:i:4:p:299-313:n:1
    DOI: 10.1515/orga-2017-0022
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    References listed on IDEAS

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