by Another cup of coffee At last (on Via Garibaldi, Genova) we found a cup big enough for the morning coffee needs of my better half … Being an economist, I, of course, came to think of a famous experiment involving coffee … Pros. Kahneman, Knetsch & Thaler conducted a study to see how the endowment effect influences our decision making. The scientists randomly divided participants into buyers and sellers and gave the sellers coffee mugs as a gift. They then asked the sellers for how much they would sell the mug and asked the buyers for how much they would buy it. Results showed that the sellers (who owned the mugs) placed a significantly higher value on the mugs than the buyers did. They were willing to sell a mug for .12 while buyers were willing to
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Another cup of coffee
At last (on Via Garibaldi, Genova) we found a cup big enough for the morning coffee needs of my better half …
Being an economist, I, of course, came to think of a famous experiment involving coffee …
Pros. Kahneman, Knetsch & Thaler conducted a study to see how the endowment effect influences our decision making.
The scientists randomly divided participants into buyers and sellers and gave the sellers coffee mugs as a gift. They then asked the sellers for how much they would sell the mug and asked the buyers for how much they would buy it.
Results showed that the sellers (who owned the mugs) placed a significantly higher value on the mugs than the buyers did. They were willing to sell a mug for $7.12 while buyers were willing to pay $2.87 (median reservation prices).
People appreciate things that they already own more than those which they might own. The fear of losing the mug (loss aversion) becomes the cause of the contradiction in the evaluation of the cost of the coffee mug.