The Endowment Effect and Seller Behavior: Evidence from the Real Estate Market

An endowment effect arises when people demand more to give up a good than they would pay to acquire it. Using a unique dataset that provides complete histories of actual transactions in the real estate market, this study documents a seller‐buyer valuation gap consistent with an endowment effect among real estate owners, regardless of gender or experience. Further comparisons using various homeowners’ purpose and transaction characteristics reveal that whereas homeowners of owner‐occupied properties exhibit a smaller valuation gap, those faced with higher liquidity exhibit a significantly larger valuation gap. These patterns are consistent with endowment‐related behavior, although listing prices may also reflect strategic considerations.