Lamont Has a 42-Inch High Definition Television That He Purchased

Lamont has a 42-inch high definition television that he purchased for $1200 six months ago. He's decided to replace it with a larger 60-inch television, and tries to sell the smaller one for $1100. He finds that nobody will buy it, and tells prospective buyers, "it is almost brand new and I'm selling it for less than it cost when I bought it!" Lamont fails to recognize that the same televisions can now be purchased for $800, and he is inflating the value of his television just because he owns it. This is called the

A) endowment effect.
B) disposition effect.
C) escalation effect.
D) sunk cost principle.

Correct Answer:

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