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Endowment Effect
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Definition: Endowment Effect
Originally coined by economist Richard Thaler, the endowment effect hypothesizes that people overvalue what they possess. Once an item has been acquired, its owner considers it more valuable than it actually is because they've established a sense of ownership. In one experiment, Thaler found that people demanded $7 for a mug that had been given to them but would only pay $3 to buy a mug from someone else.
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