Evidence of the ‘endowment effect’ – ownership of an asset changing one’s valuation of it – runs counter to standard microeconomic theory. This column uses evidence from the Indian stock market’s random allocation of shares in IPOs to show that endowment effects do occur in even outside of controlled experiments, and correlate highly with measures of market experience. This evidence suggests that agents’ inertial behaviour explains endowment effects better than standard explanations.
Santosh Anagol, Vimal Balasubramaniam, Tarun Ramadorai, 17 July 2016
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