Abstract
This article explores the impact of the endowment effect on market efficiency, with a specific focus on attenuating this effect to improve overall efficiency. The analysis is grounded in a classical three-dimensional theoretical framework encompassing willingness to pay (WTP), willingness to accept (WTA), and loss aversion. The article discusses strategies to narrow the gap between WTA and WTP and reduce loss aversion as means to mitigate the endowment effect and enhance market efficiency. Drawing on literature reviews and case studies, the paper examines three applications of the endowment effect in the context of P2P payment, organizational co-determination, and the U.S. drinking water supply. The findings suggest that attenuating the endowment effect has the potential to improve efficiency, foster cooperation, and provide practical methods for enhancing market outcomes. To improve the future study, this paper provides insight to mitigate the endowment effect by combining closing the WTA-WTP discrepancy and reducing the loss aversion, introducing proxy variables based on specific contexts for empirical study.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
