The Psychology of the Endowment Effect (Divestiture Aversion)

In psychology, the term “endowment effect” (also referred to as “divestiture aversion”), refers to “ascribing more value to ones possession, simply because it is owned, with little value being based upon actual intrinsic value”. This leads people to believe that their item is more valuable than what the market is actually willing to pay for it. This phenomena is found in virtually all people with items of great and little value alike. If a person owns a particular shirt, they are less willing to...

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