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The endowment effect, or divestiture aversion, is a cognitive bias that leads people to prefer keeping what they own rather than acquiring the same item if they don’t own it. Research shows that individuals' maximum willingness to pay (WTP) to acquire an object is often lower than their minimum willingness to accept (WTA) to part with it, highlighting a psychological attachment linked to ownership.
Example
In a study by Daniel Kahneman and colleagues, participants who were given a mug valued it at about twice the price they were willing to pay for it, illustrating the endowment effect.
How to overcome this bias
To overcome the endowment effect, individuals can focus on objective valuations rather than emotional attachments and consider the actual market value of the items.