Today I had a conversation with my friend who had recently won a Bluetooth speaker at his company raffle. He didn’t need it and I have been wanting one so I asked him what he would sell it for. He said $300. I was surprised, that’s how much the speakers retailed for in stores. I then asked him how much he would buy the speakers for and his response, “Buy this? Are you kidding? I wouldn’t pay money for these speakers.” What is going on? How can he value the speakers concurrently at $300 as well as $0?
This concept in the psychology world is known as the endowment effect. Endowment effect – we value an item more when we own it. So, why does this happen?
- Ownership is such a big part of our society that we tend to focus on what we may lose rather than on what we may gain.
- The connection we feel to the things we own makes it difficult for us to dispose of them.
- We assume that people will see the transaction through our eyes.
Humans and logic certainly do not go together like a horse and carriage.