The Endowment Effect
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- Опубликовано: 7 сен 2024
- A brief explanation of the endowment effect-a classic case of how human behavior is a lot more confusing (and a lot less rational) than one might predict.
WORKS CITED:
“Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias” Daniel Kahneman, Jack L. Knetsch, Richard H. Thaler in The Journal of Economic Perspectives. Winter 1991 www.princeton....
“Loss aversion in riskless choice: a reference-dependent model” Amos Tversky and Daniel Kahneman in The Quarterly Journal of Economics. November 1991 www3.uah.es/eco...
“Explanations of the endowment effect: an integrative review” Carey K. Morewedge and Colleen E. Giblin. June 2015 careymorewedge....
“Possession, feelings of ownership and the endowment effect” Jochen Reb and Terry Connolly in Judgement and Decision Making. April 2007 journal.sjdm.or...
LINKS AND FURTHER READING:
bigthink.com/in...
www.scheller.g...
www.cmu.edu/die...
www.economist.c...
www.uibk.ac.at...
www.ft.com/intl...
www.forbes.com/...
ASSETS/MUSIC:
Pusheen Source: commons.wikime...
I Am Running Down the Long Hallway of Viewmont Elementary by Chris Zabriskie
freemusicarchiv...
You deserve a lot more subscribers,than you have...
Very good and proffesional video!
Thank you! Please feel free to share my videos to spread the word about my channel if you feel i've earned it!
professional
SUPER EXCELLENT IN CAPITAL LETTERS! Short, clear, informative and easy to understand! Thanks a lot
I also like to call it the "My precious" effect. ;p
😂😂
"Something vaguely funny about monday" Haha, thanks for the explanation!
Nice catch ;) Glad you liked the vid!
Watched this in class today, explanation was good! Totally agree on how trials and free samples increase people's perception of value but sometimes this could also result in lost customers when they discover it is not something they like after trying, as opposed to having to buy without trying :
I presume this similarity applied to people selling services? I always find that people fall off their chairs when I tell them roughly how much my design services would cost. From my perspective I am barely scraping by. But from the client perspective, I'm pocketing wads of cash while sitting on a mountain of dollar bills.
I actually havent stumbled upon any literature covering the endowment effect with regards to services. I would imagine that the effect would be similar in that a potential customer, not having the services or the result of said services in their possession, might value said services less--which seems to match your experience!
The only thing I could think of that might make the endowment effect inapplicable to services is that services aren't transferrable like goods (such as mugs) are.
Amazing video
Always love seeing videos from you dude, keep it up!
Thank you so much for the support, hearing that is all the encouragement i need! :)
Excellent!
Just found out your channel omg you deserve more views and subscribers!!!
Thank you so much, and if you think I deserve it, please share my videos as you see fit!
I did!!! Keep up your good work mate
Well-explained. I linked your video for why we hoard hotel toiletries. Thank you!
Awesome videos! Keep making more, spreading knowledge is awesome 💡
That means a lot! Thank you so much
Great video
very good and understandable, thank you
0:54 well I don't think anyone would say that these two people would come up with the same answer, so the rational thing is the thing that is observed, which you later explained is that these two prices would differ greatly
Interesting that you say that, a more thorough explanation of why you would expect the two people to come up with a similar value is that a rational person would be more likely to value the cup based on 1) the cups objective qualities (which are the same regardless of if you are a buyer or a seller) and 2) how much use/happiness the cup brings to you (which should also more or less stay the same between buyers and sellers).
This is the general understanding of that point, but I'd love to hear why you may think otherwise!
Yeah but only if you would ask how valuable the cup is. Obviously if anyone were to sell the cup they would know that they are choosing bigger price than they think the cup deserves, because they care more about the profit than pricing the cup.
Great point! I didn't mention this in the video, but the "strategic misrepresentation" explanation (that buyers intentionally inflate prices to get the most money) does not necessarily explain the entirety of the endowment effect, and this has been shown by setting up other studies.
For example: "People exhibit an endowment effect even when given a single opportunity to buy, choose, or sell a good at a single price" In such a scenario, it would not be strategic to overvlaue the cup, because there is a good chance a buyer would not buy it, and the seller would get $0, but the endowment effect persists.
(see pages 340-341 of "Explanations of the endowment effect: an integrative review" by Carey K. Morewedge and Colleen E. Giblin careymorewedge.com/papers/EndowmentReview.pdf)
Yeah, that's why they don't come up with a nonrational price like $1000 for a cup, so that not lose a client. The only nonobvious thing to study is exactly how much bigger the price is going to be in relation to the actual value. And that you partially covered in the video.
Oh great, another one of those channels where I get to be among the very first subscribers!
Thank you so much! if you don't mind me asking, how'd you find out about the channel?
I searched "Status quo bias" to find this video. Wasn't exactly what I searched for, but almost. By the way, I realized I actually wanted that coffee cup.
+andersv20 Awesome! I was initially going to make a video on status quo bias but I found the endowment effect a little more interesting...either way I'm glad you enjoyed! and I don't have a cup to give you, but I did make a new video that will be posted this week, so you can have that instead :-)
This was big help🙏🙏
thanks for explanation
very apt
so you are telling me dressing rooms have an effect on my buying power?? ya, makes sense. how that went over my head beats me!
it's good, but don't forget to cited the resources
why did they sleep on you
One year from today, you'll have at least one zero behind the number of subscribers you have today, if you don't allow yourself to be negatively impacted by "The Endowment Effect" . . .
Hopefully.... :-)
I don't see a reason why a being as insignificant as an individual human would be self-interested if it is completely rational so the theory doesn't make any sense right from the start.
Interesting point, i hadn't considered the seeming contradiction between self-interest and rationality, but the two never seemed to me to be completely opposed. Perhaps another way to describe it is as the view that people are self-interested and follow this interest in a completely rational way. What are your thoughts on that?
Here are some of the ideas I was addressing in that point of the video: (if you'd like more in-depth readings let me know!) en.wikipedia.org/wiki/Rational_choice_theory
en.wikipedia.org/wiki/Neoclassical_economics
@NewName what is so nonrational about being self-interested?
I haven't exactly thought of that. If you look at it that way the theory actually sounds somewhat reasonable and one can respond to your criticisms by saying that there is no such thing as value objectively and that what really matters is perceived value because that is what matters to a self interested individual.
EDIT: I am still skeptical about humans being rational at their core though. I think people are naturally selfish and emotional, but that they have the unique potential to be rational and that we must nurture that potential and educate people so that one day the human race will become what some believe it already is. I am not saying that everyone is selfish though, I am just saying that selflessness is something that needs to be learned.
The simple fact that an individual human life doesn't matter all that much. You live and than you die and you might have as well not lived. You may have a happy life or a miserable, but a balance of certain chemicals doesn't matter that much in the grand scheme of things.
You can make excuses, but the importance of one's life always comes down to his relation to something greater: a worker had a great life if he worked well and contributed to his society, a family member had a great life if he made lives of other family members better, an inventor or a scientist had a great life if a larger body people ended up using what they invented or came up with, a statesman had a great life in relation to how they lead the state, a religious person's life is as good as their relation with a force that is greater than them and as their contribution to the community of like minded people...
So in the end individuals don't matter as such, they matter as parts of something greater to which they contribute to.
It is completely natural to be self interested, but it is not rational. It is rational to acknowledge that you are not that great and to devote yourself to something that is greater than yourself.
So what is the end goal of contributing to the society and things that you mentioned? What is that "greater than yourself" thing and why is it greater? I think that in that big perspective it's all pointless and nothing is there aren't more rational things, also because the rational thing is only that what human mind decides.
poor English pronunciation , need more attention to understand video
They're speaking perfect English, you just have poor listening skills