Behavior Economics

What is the Endowment Effect? Behavior economists like Dan Ariely, believe that people value their possessions more than they are worth. So if you want to make someone feel good who has just suffered a loss, you could say, "Count your blessings". I thought behavior economics was a widely accepted discipline within economics but reading Cafe Hayek, I get the impression that many economists doubt the conclusions of behavior economics.

One such dispute is over the Loss-Aversion behavior characteristic. In this theory, actors are so risk-averse that they would rather take a loss that risk any potential gain. I completely believe this theory as I have seen it repeatedly played out in wrestling.

My strategy was to combine both the Endowment Effect with Loss-Aversion. I simply would give an opponent a leg to hold on to as bait, then I would use any of two or three moves to "counter". I learned this from Dan Gable before the 1972 Olympics. Dan said that American wrestlers would continue to hold on to the leg while you fed him his lunch. Dan said that Russian wrestlers would let go of the leg, but not American. Do the two effects explain property division in a divorce?

Community property law divide the property that married couples accumulated during their marriage to be divided equally in a divorce. Perhaps the respondent wants the house so bad that the division of property becomes unequal in the negotiation of marital assets. I can see this as being attributed to the Endowment Effect.

There's much to learn about this field, and perhaps I don't have the correct analytical paradigm to evaluate this field. But it's sure fun. Check out Dan Ariely's link to his blog on the right side.