ISSN 1671-3710
CN 11-4766/R

Advances in Psychological Science ›› 2019, Vol. 27 ›› Issue (3): 394-405.doi: 10.3724/SP.J.1042.2019.00394

• Special Section in Honor of the 2017 Nobel Laureate in Economics Richard H. Thaler • Previous Articles     Next Articles

Normality rather than anomaly: The theory and application of endowment effect

LI Haihong, DENG Zhou, HE Xin, SHEN Shaojing, ZOU Yawen, ZHU Minfan, WANG Yun, XIE Xiaofei()   

  1. School of Psychological and Cognitive Sciences and Beijing Key Laboratory of Behavior and Mental Health, Peking University, Beijing 100871, China
  • Received:2018-03-29 Online:2019-03-15 Published:2019-01-22
  • Contact: XIE Xiaofei


If the influence of income and trade cost were neglected, it is natural that people are willing to pay the same for something as they would require when sell it. However, Prof. Thaler discovered that it is not always the truth. It happens in daily life that individuals attach higher value to the things they own and thus their willingness to pay and willingness to sell for the very item may differ. Enlightened by the prospect theory, Thaler explained this anomaly by loss aversion and named it endowment effect. Following him, many researchers have made further exploration and argument from various angles. In this paper, we summarized previous work about endowment effect and list different explanations including loss aversion theory, psychological ownership theory, biased cognitive processing theory and evolution theory. This paper elaborated the interrelationship and disputes among the theories and finally gave the reason why endowment effect is not abnormal. Meanwhile, endowment effect plays an important role in guiding government work as well as business strategy making. Future research should enrich the theory framework, expand applications and strengthen the research in Chinese background.

Key words: endowment effect, loss aversion, ownership effect, cognitive bias, psychology, economics

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