It’s mine so it’s worth more

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?

  1. 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.
  2. The connection we feel to the things we own makes it difficult for us to dispose of them.
  3. We assume that people will see the transaction through our eyes.

Humans and logic certainly do not go together like a horse and carriage.

 

endowment-effect-by-margaret-hagan

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