No matter what it is—a pair of jeans, a car or even a house—in that moment when an object becomes your property, it undergoes a transformation.
Because you chose it and you associate it with yourself, its value is immediately increased (Morewedge et al., 2009). If someone offers to buy it from you, the chances are you want to charge much more than they are prepared to pay.
That is a cognitive bias called 'the endowment effect'.
It's the reason that some people have lofts, garages and storage spaces full of junk with which they cannot bear to be parted. Once you own something, you tend to set its financial value way higher than other people do.
When tested experimentally the endowment effect can be surprisingly strong. One study found that owners of tickets for a basketball match overvalued them by a factor of 14 (Carmon & Ariely, 2000). In other words people wanted 14 times more than others were prepared to pay. However, this is a particularly high one and the ratio will vary depending on what it is.
The endowment effect is particularly strong for things that are very personal and easy to associate with the self, like a piece of jewellery from your partner. Similarly we also overvalue things we've had for a long time.
Sometimes, of course, the sentimental value of things is justified; but more often than not people hold on to old possessions for no good reason. So if you're surrounded by rubbish, ask yourself: do I really need all this, or is it the endowment effect?
After all, it's just stuff.
Image credit: Kevin Utting
→ This post is part of a series on cognitive biases:
- The Dunning-Kruger Effect: Why The Incompetent Don’t Know They’re Incompetent
- The Worse-Than-Average Effect: When You’re Better Than You Think
- Why You’re a Sucker for the Impact Bias
- The Hindsight Bias: I Knew It All Along!
- How to Overcome the Egocentric Bias
- See How Easily You Can Avoid The Memory Bias
- Why Your Future Self is an Emotional Mystery: The Projection Bias
- How To Avoid Choosing the Wrong Job or House: Fight the Distinction Bias
- 4 Belief Biases That Can Reduce Pleasure
- Does Delaying Decisions Lead to Better Outcomes?
- The Belief in a Just World: A Fundamental Delusion
- Why Society Doesn’t Change: The System Justification Bias
- The Availability Bias: Why People Buy Lottery Tickets
- The Illusion of Transparency
- The Illusion of Control: Are There Benefits to Being Self-Deluded?
- The Endowment Effect: Why It’s Easy to Overvalue Your Stuff
- Illusory Correlations: When The Mind Makes Connections That Don’t Exist
- The Anchoring Effect: How The Mind is Biased by First Impressions
Making Habits, Breaking Habits
In his new book, Jeremy Dean--psychologist and author of PsyBlog--looks at how habits work, why they are so hard to change, and how to break bad old cycles and develop new healthy, creative, happy habits.
→ "Making Habits, Breaking Habits", is available now on Amazon.Reviews
The Bookseller, “Editor’s Pick,” 10/12/12 “Sensible and very readable…By far the most useful of this month’s New You offerings.”
Kirkus Reviews, 1/1/13 “Making changes does take longer than we may expect—no 30-day, 30-pounds-lighter quick fix—but by following the guidelines laid out by Dean, readers have a decent chance at establishing fulfilling, new patterns.”
Publishers Weekly, 12/10/12 “An accessible and informative guide for readers to take control of their lives.”