The Impact Of Loss Aversion On Endowment Effect

In this research, we dive into the specifications of three ideas of Prospect Theory: Kahneman’s and Tversky’s initial conception, KR Utility, and Third Generation. After that, we investigate the presence of loss aversion in each of the four utility functions provided, understanding whether the endowment effect is directly correlated with the loss aversion. For that, we analyze the concepts of WTA and WTP under each specification. As a result, in all cases explored, there is no direct relationship between the latter, leading us to believe that there is no correlation between loss aversion and endowment effect.