Endowment Effect: Impact Factors and Influencing Mechanism

Abstract

As a theoretical branch of behavioral economics, the endowment effect (EE) reflects the research method of behavioral economics, challenges the assumption that people are rational in traditional economics, and complements the deficiency of the Coase theorem by emphasizing that the phenomenon that people overvalue an item after owning, then it will affect the transaction of the item. In this paper, the author introduces the basic theories about the EE, analyzes the driving factors of the EE, and introduces the latest research findings on the basis of the loss aversion (LA) theory, providing readers with a new way to understand the EE. At the same time, as a link impressionable to the EE in the transaction, the author also analyzes and compares the research results of previous researchers on the influence of EE on the negotiation process, analyzes the reasons why the negotiation participants should avoid or reduce the influence of EE in the negotiation to achieve the goal of negotiation, and puts forward suggestions for the negotiators.