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Journal ojEconornic Perspectives
5
1
Winter 1991
-Pages 193-206
Anomalies The Endowment EfFect, Loss Aversion, and Status Quo Bias
Daniel Kahneman; Jack L Knetsch; Richard H Thaler
Economics can be distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that agents have stable, well-defined preferences and make rational choices consistent with those preferences in markets that (eventually) clear. An empirical result qualifies as an anomaly if it is difficult to "rationalize," or if implausible assumptions are necessary to explain it within the paradigm. This column presents a series of such anomalies. Readers are invited to suggest topics for future columns by sending a note with some reference to (or better yet copies of) the relevant...
research. Comments on anomalies printed here are also welcome. The address is: Richard Thaler, c/o Journal of Economic Perspectives, Johnson Graduate School of Management, Malott Hall, Cornell University, Ithaca, NY 14853.
After this issue, the "Anomalies" column will no longer appear in every issue and instead will appear occasionally, when a pressing anomaly crosses Dick Thaler's desk. However, suggestions for new columns and comments on old ones are still welcome. Thaler would like to quash one rumor before it gets started, namely that he is cutting back because he has run out of anomalies. Au conlraire, it is the dilemma of choosing which juicy anomaly to discuss that takes so much time.
Daniel Kahneman is Professor of Psychology, Uuive sity of Calijomia, Berkeley, California. Jack L. Knelsch is Professor of Economics and Natural Resources Managetnent, Simon Fraser University, Bnrnaby, British Columbia, Cap:ada. Richard H. Thaler is Henrietta Johnson Louis Professor of Economics, Johnson School of Management, Cornell University, Ithaca, Neru York.
Introduction A wine-loving economist we know purchased some nice Bordeaux wines
years ago at low prices. The wines have greatly appreciated in value, so that a bottle that cost only SIO when purchased would now fetch S200 at auction. 'This economist now drinks some of this wine occasionally, but would neither be willing to sell the wine at the auction price nor buy an additional bottle at that price.
Thaler (1980) called this pattern-the fact that people often demand much more to give up an object than they would be...