Endowment Effect: From the Perspective of Employees’ Loyalty, Perceived Value and Used Car Pricing

Abstract

The "endowment effect," a central cognitive bias in behavioral economics, represents individuals' tendency to assign a higher value to items they own compared to identical or similar items they don't possess. This research paper presents a comprehensive exploration of this effect and its diverse applications in three significant areas: bolstering employee loyalty, understanding the moderating role of emotional states in the perceived value of goods, and discerning pricing mechanisms in the secondhand car market. By leveraging the endowment effect, businesses can enhance employee loyalty and develop more effective pricing strategies in secondhand markets. Inherent in these applications is the opportunity to capitalize on inherent cognitive biases to optimize outcomes across different economic activities. Furthermore, understanding the interaction between emotional states, particularly positive emotions, and the endowment effect provides insights into consumer behavior, influencing their perceived value and purchasing intentions. The interplay between the endowment effect and emotional states offers a nuanced understanding of the multifaceted nature of consumer behavior. Thus, this research underscores the far-reaching implications of the endowment effect, highlighting its pervasive influence in our economic decision-making processes.