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Suppose Jonathan walks into a wall art store looking for a painting to hang in his new office. The store has many pieces of art, the less expensive ones don’t meet the décor requirements of his office. There are some which are very classy but outside of his budget. He finally finds one that has a decent look matching the décor of his office and a reasonable price of $500. Given the painting’s price and its looks, he is almost indifferent between owning that painting and giving away $500, on one hand, versus not owning that painting and keeping his money, on the other. He purchases the painting and brings it to his office, hangs it to wall facing his chair and enjoys it with general feeling of satisfaction with his purchase. Next day, he receives a phone call from art store asking if he would sell the painting back. The store offers $650, giving him an extra $150 for the trouble. According to the standard cost- benefit theory, if he was indifferent between painting and $500, then he should be more than happy to sell it back for anything over $500 as long as the extra amount includes enough to compensate for the inconvenience. After pondering for a long time on the deal, he rejects to sell it back to store because he gets bound by feeling of ownership and possession for that piece of
What is cognitive bias or phenomenon which is inducing Jonathan to behave in that manner? Explain your answer with another example of that bias. Suggested length of the answer is 1 page
Why this cognitive bias or phenomenon which you concluded for your response in II. a happens? Is this cognitive bias related to another important bias in the field of behavioral economics? If yes, please elaborate. Suggested length of the answer is 1 page