Management of Digital Innovation

Innovation Processes

Endowment effect

This bias occurs when we overvalue something that we own, regardless of its objective. It is evident when people become relatively reluctant to part with a good they own for its cash equivalent, or if the amount that people are willing to pay for the good is lower than what they are willing to accept when selling it. Put more simply, people place a greater value on things once they have established ownership. This is especially true for things that wouldn’t normally be bought or sold on the market, usually items with symbolic, experiential, or emotional significance. The endowment effect is an illustration of the status quo bias and can be explained by loss aversion.

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