Abstract
In this Chapter, we are concerned with perhaps the most important implication of loss aversion: Empirical and experimental observations have shown that people tend to underweight opportunity costs relative to out-of-pocket costs. Thaler (1980, p. 44) who explained this finding by loss aversion labelled it endowment effect. At first glance, the undweighting of opportunity costs appears to be quite innocuous. In this Chapter, we will show, however, that this framing effect could have far reaching consequences for economic analysis and policy.
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© 1999 Physica-Verlag Heidelberg
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Traub, S. (1999). The Endowment Effect. In: Framing Effects in Taxation. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-95938-7_4
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DOI: https://doi.org/10.1007/978-3-642-95938-7_4
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-1240-4
Online ISBN: 978-3-642-95938-7
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