THE ENDOWMENT EFFECT AS BLESSING

Sivan Frenkel; Yuval Heller; Roee Teper

doi:10.1111/iere.12300

THE ENDOWMENT EFFECT AS BLESSING

Sivan Frenkel
, Yuval Heller
, Roee Teper

Department of Economics

Tel Aviv University
University of Pittsburgh

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

We study the idea that seemingly unrelated behavioral biases can coevolve if they jointly compensate for the errors that any one of them would give rise to in isolation. We suggest that the “endowment effect” and the “winner's curse” could have jointly survived natural selection together. We develop a new family of “hybrid-replicator” dynamics. Under such dynamics, biases survive in the population for a long period of time even if they only partially compensate for each other and despite the fact that the rational type's payoff is strictly larger than the payoffs of all other types.

Original language	English
Pages (from-to)	1159-1186
Number of pages	28
Journal	International Economic Review
Volume	59
Issue number	3
DOIs	https://doi.org/10.1111/iere.12300
State	Published - Aug 2018

Bibliographical note

Publisher Copyright:
© (2018) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Funding

1Yuval Heller is grateful to the European Research Council for its financial support (StG #677057). A previous version of the article was titled “Endowment as a Blessing.” We thank Eddie Dekel, John Duffy, Alan Grafen, Richard Katzwer, Shawn McCoy, Erik Mohlin, Thomas Norman, Luca Rigotti, Larry Samuelson, Lise Vesterlund, the Associate Editor and the anonymous referees, and various seminar audiences for valuable discussions and suggestions and Sourav Bhattacharya for the query that initiated this project. Please address correspondence to: Yuval Heller, Department of Economics, Bar Ilan University, Ramat Gan 5290002, Israel. E-mail: [email protected].

Funders	Funder number
Horizon 2020 Framework Programme	677057
European Commission

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10.1111/iere.12300

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THE ENDOWMENT EFFECT AS BLESSING

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Bibliographical note

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