Question

What is the endowment​ effect?

A. People place a higher value on a good if they own it than they do if they are considering buying it.

B. Wealthier individuals place greater value on a particualr good relative to poorer individuals.

C. People place a higher value on goods that they want relative to similar goods that they own.

D. The more you have of a​ good, the less value you place on consuming additional units of that same good.

Answer 1

Endowment effect is a hypothesis that states that, in general, a person place a greater value on that thing which he owns and put a lower value on that thing which he do not own.

As per endowment effect, for example, if person X owns Good A then he would value it at higher price than the price he will put on A if he is considering buying it.

So, when people place higher value on good if they own it than they do if they are considering buying it, it is said to be due to endowment effect.

Hence, the correct answer is option (A).