The Endowment Effect, Loss Aversion, and Status Quo Bias

TLDR

Most behavior is explained by stable preferences and rational choices in clearing markets, and an empirical result is deemed an anomaly when it is difficult to rationalize or requires implausible assumptions. The column presents a series of anomalies that challenge the standard rational choice paradigm. Readers are invited to suggest topics for future columns.

Abstract

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