Suppose your instructor gave hats with your school’s logo to half of your economics classmates. She then asked these students to value the hats, and the average response was $9 per hat. Under the endowment effect, we should expect that the average value assigned by the economics students who did NOT receive the hats to be:
A. higher.
B. lower.
C. the same.
D. We cannot answer this question without knowing more about the risk preferences of the students.
Answer:B
Suppose your instructor gave hats with your school’s logo to half of your economics classmates. She then asked these students to value the hats, and the average response was $9 per hat. Under the endowment effect, we should expect that the average value assigned by the economics students who did NOT receive the hats to be:
A. higher. B. lower. C. the same. D. We cannot answer this question without knowing more about the risk preferences of the students.