Matthew Rabin and Richard H. Thaler, “Anomalies: Risk Aversion,”
Journal of Economic Perspectives 15 (2001): 219–32.
economists and psychologists : Several theorists have proposed versions
of regret theories that are built on the idea that people are able to
anticipate how their future experiences will be affected by the options that
did not materialize and/or by the choices they did not make: David E. Bell,
“Regret in Decision Making Under Uncertainty,” Operations Research 30
(1982): 961–81. Graham Loomes and Robert Sugden, “Regret Theory: An
Alternative to Rational Choice Under Uncertainty,” Economic Journal 92
(1982): 805–25. Barbara A. Mellers, “Choice and the Relative Pleasure of
Consequences,” Psychological Bulletin 126 (2000): 910–24. Barbara A.
Mellers, Alan Schwartz, and Ilana Ritov, “Emotion-Based Choice,” Journal
of Experimental Psychology—General 128 (1999): 332–45. Decision
makers’ choices between gambles depend on whether they expect to
know the outcome of the gamble they did not choose. Ilana Ritov,
“Probability of Regret: Anticipation of Uncertainty Resolution in Choice,”
Organiz {an>y did not ational Behavior and Human Decision Processes
66 (1966): 228–36.

27: The Endowment Effect

What is missing from the figure : A theoretical analysis that assumes loss
aversion predicts a pronounced kink of the indifference curve at the
reference point: Amos Tversky and Daniel Kahneman, “Loss Aversion in
Riskless Choice: A Reference-Dependent Model,” Quarterly Journal of
Economics 106 (1991): 1039–61. Jack Knetsch observed these kinks in
an experimental study: “Preferences and Nonreversibility of Indifference
Curves,” Journal of Economic Behavior & Organization 17 (1992): 131–
39.
period of one year : Alan B. Krueger and Andreas Mueller, “Job Search
and Job Finding in a Period of Mass Unemployment: Evidence from High-
Frequency Longitudinal Data,” working paper, Princeton University
Industrial Relations Section, January 2011.
did not own the bottle : Technically, the theory allows the buying price to be
slightly lower than the selling price because of what economists call an
“income effect”: The buyer and the seller are not equally wealthy, because
the seller has an extra bottle. However, the effect in this case is negligible
since $50 is a minute fraction of the professor’s wealth. The theory would
predict that this income effect would not change his willingness to pay by
even a penny.
would be puzzled by it : The economist Alan Krueger reported on a study