Irrationality

Limits to cognition (Simon and Hayek)

Loss Aversion

Loss aversion in behavioral economics refers to a phenomenon where a real or potential loss is perceived by individuals as psychologically or emotionally more severe than an equivalent gain. For instance, the pain of losing $100 is often far greater than the joy gained in finding the same amount.

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Anchoring

Using a price anchor (e.g. dropping a certain number) causes people to attach to numbers.

Endowment effect

The endowment effect refers to an emotional bias that causes individuals to value an owned object higher, often irrationally, than its market value.

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References

• Thinking, Fast and Slow by Daniel Kahneman

• Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely

• Endowment Effect by Investopedia

• Loss Aversion by Investopedia