It seems that Bildungsroman has sold her books in Costa Rica, after an agonizing Auseinandersetzung over the matter.
I know not the details of this case, but empirical economics suggests a lesson. Endowment effects are significant, especially for people who are not professional traders of the item in question. That means we tend to value things more, simply because those things are ours.
With some probability, that tendency is just plain irrational. It might make sense to treat our friends or our babies this way, or to act this way in a subsistence economy, but endowment effects should not rule the behavior of not-so-risk-averse well-off, Americans. So if you are even considering selling something, you probably should do so.
Bye, bye books. And don’t buy another commodity, invest in memorable experiences.
I might add that when it concerns equities, buy and hold is better than portfolio turnover. For second best reasons, people would be better served by a stronger endowment effect; greater possessiveness would cancel out their mistaken belief that they can beat the market.
Addendum: I believe that endowment effects are stronger for items we have paid for or won through competitive effort. This means that your kid should pay for some of his or her college education, read more here.
I told Jacqueline to distribute all her books to the passengers of the plane before check-in and get them after landing.
“My favorite customer was the one who bought my box of econ textbooks and related reference materials to donate to a school for smart kids from poor countries.
”
That’s nice indeed!
Endowment effects in financial markets are as often good as bad.
Rebalancing is a very important and completely counterintuitive
part of optimal portfolio management. People are very reluctant to
sell their winners–endowment effects would just make this effect worse.
I didn’t know Paul Heyne became an author.
What a great teacher he was…
Sad to see he’s passed on.
This is why it’s so difficult to get anyone to trade with me in my fantasy football league.
I’m certain the situation were reversed they’d also refuse exactly the opposite player trade. (If they have player A and I have player B, they refuse to trade A for B. If they have player B and I have player A, they refuse that trade also.)
With regards to equities at least there’s the option to sell half or buy half when I’m conflicted. I’ve regularly taken up that approach of increasing or decreasing positions rather than outright buying all/selling all. In my experience a bias towards letting winners run is a good approach.
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