7.26 Investigating the Endowment Effect.

Consider an ice-cold glass of lemonade on a hot July day. What is the maximum price you’d be willing to pay for it? What is the minimum price at which you’d be willing to sell it? For most people, the maximum buying price will be less than the minimum selling price. In behavioral economics, this occurrence is called the endowment effect. People seem to add value to products, regardless of attachment, just because they own them.

As part of a series of studies, a group of researchers recruited 40 students from a graduate marketing course and asked each of them to consider a Vosges Woolloomooloo gourmet chocolate bar made with milk chocolate and coconut.¹¹ Test the null hypothesis that there is no difference between the two prices. Also construct a 95% confidence interval of the endowment effect.