On Persistency of Endowment Effect Relationship Between Affection and Endowment Effect

The manager fall into the trap that the older production equipment can still operate safely and with moderate efficiency due to the endowment effect attached to the older production equipment. Such a circumstance where an economic thinking (efficiency) penetrates our decision on equipment replacement hinders rational judgment on the replacement of older equipment from the viewpoint of industrial safety. This must be corresponding to one of the cognitive biases. On the basis of the loss aversion property derived from prospect theory, we discussed whether stronger endowment effect was observed when the affection was attached to the object than when the affection was not attached to the object at all. Stronger endowment effect was observed when the affection was attached to the object than when the affection was not attached to the object at all.