Description

The IKEA effect is a cognitive bias that makes us place higher value on things we helped to create. The effect completely disappears when the task is not completed well or not completed. Dan Ariely, a prominent behavioral economist, has pointed out the implications of this effect in the workplace. He showed that it could be harnessed to increase worker motivation by giving them credit for their creations. This also has applications in consumer behavior, because it implies that people will be willing to pay a premium for customized objects. The IKEA effect can also have negative impacts. For example, it contributes to the sunk costs fallacy, because people will have trouble moving on if they devoted time and effort into something. It can also encourage people to invest more into what they have worked on rather than better or more efficient alternatives.

Example

In an experiment conducted by Norton, Mochon and Ariely in 2012, two groups received IKEA boxes that were either already fully assembled or that had to be put together. The participants then had an auction for the furniture they had either been given or assembled. The furniture was identical, but those who had built their furniture were willing to pay more.

Further Reading

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The Decision Lab is a think tank focused on creating positive impact in the public and private sectors by applying behavioral science.

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