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The endowment effect is a cognitive bias where we value something we own more than we would if we didn't own it. We can be endowed to objects but als… - Annie Duke
" "The endowment effect is a cognitive bias where we value something we own more than we would if we didn't own it. We can be endowed to objects but also to our own ideas and beliefs. Endowment is an obstacle to quitting because when we irrationally value things we own, we miscalculate their expected value. We might think the company we started or the project we devised or the belief we have is worth more than it actually is. We prefer to stick with the status quo. We are more tolerant of bad outcomes that come from sticking with what we are already doing than bad outcomes that come from switching to something new. This phenomenon is part of omission-commission bias. When you say, "I'm just not ready to decide yet," what you are really saying is, "For now, I am choosing the status quo." Even in highly data-rich environments like professional sports, sunk cost, endowment, and status quo bias distort decision-making.
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Also Known As
Birth Name:
Anne LaBarr Lederer
Alternative Names:
Anne LaBarr Duke
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Annie Lederer
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Anne Lederer
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Additional quotes by Annie Duke
when we quit things, we usually follow the idiom out of sight, out of mind. We don't naturally track things that we're no longer in. This is likely what is causing the problem with the portfolio managers. When they enter into a position, they're tracking that every day, because it's part of the portfolio. But once they exit, they're not tracking it in the same way, because the position is now off their books. It's no longer part of their P&L statement, not as far as they can see in any obvious way.
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