Why do we value items more if they belong to us?

The 

Endowment Effect

, explained.
Bias

What is the Endowment Effect?

The endowment effect describes how people tend to value items that they own more highly than they would if they did not belong to them. This means that sellers often try to charge more for an item than it would cost elsewhere.

An illustration showing a person admiring an orange circle labeled "Mine" and valued at $6, while a similar circle labeled "Not Mine" is valued at $2. The text "Endowment Effect" is at the top.

Where this bias occurs

Let’s say a few months ago, you bought a concert ticket for $100. You just found out that you won’t be able to make it to the concert after all, so you decide to resell your ticket. You price the ticket at $150, because just selling it at market value would feel like you were losing out. 

Sources

  1. Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39-60. https://doi.org/10.1016/0167-2681(80)90051-7
  2. Kahneman, D., & Tversky, A. (1984). Choices, values, and frames. American Psychologist, 39(4), 341-350. https://doi.org/10.1037/0003-066x.39.4.341
  3. Weaver, R., & Frederick, S. (2012). A reference price theory of the endowment effect. Journal of Marketing Research, 49(5), 696-707. https://doi.org/10.1509/jmr.09.0103
  4. Morewedge, C. K., & Giblin, C. E. (2015). Explanations of the endowment effect: An integrative review. Trends in Cognitive Sciences, 19(6), 339-348. https://doi.org/10.1016/j.tics.2015.04.004
  5. Beggan, J. K. (1992). On the social nature of nonsocial perception: The Mere ownership effect. Journal of Personality and Social Psychology, 62(2), 229-237. https://doi.org/10.1037/0022-3514.62.2.229
  6. Hendricks, K. (2018, December 11). The endowment effect: Why ownership makes you overvalue your things. Kent Hendricks. https://kenthendricks.com/endowment-effect/
  7. Maddux, W., Yang, H., Falk, C., Adam, H., Adair, W. L., Endo, Y., Carmon, Z., & Heine, S. J. (2010). For whom is parting with possessions more painful? Cultural differences in the endowment effect. SSRN Electronic Journal, 21(12), 1910-1917. https://doi.org/10.2139/ssrn.1670617
  8. Lakshminaryanan, V., Keith Chen, M., & Santos, L. R. (2008). Endowment effect in capuchin monkeys. Philosophical Transactions of the Royal Society B: Biological Sciences, 363(1511), 3837-3844.

About the Authors

A man in a blue, striped shirt smiles while standing indoors, surrounded by green plants and modern office decor.

Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

A smiling man stands in an office, wearing a dark blazer and black shirt, with plants and glass-walled rooms in the background.

Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

About us

We are the leading applied research & innovation consultancy

Our insights are leveraged by the most ambitious organizations

Image

“

I was blown away with their application and translation of behavioral science into practice. They took a very complex ecosystem and created a series of interventions using an innovative mix of the latest research and creative client co-creation. I was so impressed at the final product they created, which was hugely comprehensive despite the large scope of the client being of the world's most far-reaching and best known consumer brands. I'm excited to see what we can create together in the future.

Heather McKee

BEHAVIORAL SCIENTIST

GLOBAL COFFEEHOUSE CHAIN PROJECT

OUR CLIENT SUCCESS

$0M

Annual Revenue Increase

By launching a behavioral science practice at the core of the organization, we helped one of the largest insurers in North America realize $30M increase in annual revenue.

0%

Increase in Monthly Users

By redesigning North America's first national digital platform for mental health, we achieved a 52% lift in monthly users and an 83% improvement on clinical assessment.

0%

Reduction In Design Time

By designing a new process and getting buy-in from the C-Suite team, we helped one of the largest smartphone manufacturers in the world reduce software design time by 75%.

0%

Reduction in Client Drop-Off

By implementing targeted nudges based on proactive interventions, we reduced drop-off rates for 450,000 clients belonging to USA's oldest debt consolidation organizations by 46%

Let's chat

Read Next

Optimism Bias

Why do we overestimate the probability of success?

Why do we overestimate the probability of success?

Learn More

Fundamental Attribution Error

Why do we underestimate the influence of the situation on people’s behavior?

Why do we underestimate the influence of the situation on people’s behavior?

Learn More

Spotlight Effect

Why do we feel like we stand out more than we really do?

Why do we feel like we stand out more than we really do?

Learn More
See All
Notes illustration

Eager to learn about how behavioral science can help your organization?

Contact us