Carrots Dressed as Sticks


The Economist, January 14, 2010


People are contrary creatures. A man may say he would not pay more than $5 for a coffee mug. But if he is told that the mug is his, and asked immediately afterwards how much he would be willing to sell it for, he typically holds out for more. Possession, it appears, lends things an added allure.

This makes little sense in the world of standard economic theory, where the value of something depends on what it is. But it can be explained by behavioural models in which the value people attach to objects is affected by what they already have, and people abhor losses more than they like equivalent gains.

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