Endowment Effect (in Pricing)

The cognitive bias where people overvalue what they currently have and undervalue what they'd switch to. In pricing: buyers inflate the value of their current solution (even if it's inferior) and deflate their stated willingness to pay for something new. Peer-reviewed behavioral-economics research has documented this across multiple experiments: buyers simultaneously undervalue innovations relative to their current solution and overvalue whatever they're currently using. WTP surveys capture this deflated number and present it as the ceiling. The compounding error: hypothetical bias inflates the WTP number upward, while the endowment effect deflates the true valuation downward. A WTP survey gives you an inflated estimate of an already-deflated valuation. The error doesn't cancel — it compounds the confusion.