Endowment effect.
In plain English
The endowment effect is the finding that owning something raises its value in your eyes. Kahneman, Knetsch, and Thaler demonstrated it in 1990 with a now-classic experiment: people randomly given a coffee mug demanded about twice as much to sell it as others were willing to pay to buy the same mug. With money it shows up as holding an inherited stock you would never buy today, or refusing a fair price for a possession because parting with it feels like a loss.
01Why it matters
The endowment effect keeps people in positions and possessions they would not choose fresh, so it can lock up money in a stock, a house, or an item long past the point where selling and moving on would serve them better.
02The math, step by step
You inherit shares of a company you would never pick on your own. Selling feels like giving something up, so you hold, even though if the same money arrived as cash you would invest it completely differently. Ownership, not merit, is doing the holding.
03What this is NOT
It is not just sentiment. The endowment effect appears even for random, meaningless items like an assigned mug, seconds after ownership. Sentiment is one flavor of it, but the effect is the ownership premium itself, present even with no attachment.
04Receipts
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