← all facts
behavioral economics
You overvalue things just because you own them.
The endowment effect causes people to place a higher price on items simply because they have gained possession of them.
In studies, the amount a person is willing to pay for an object is consistently lower than the amount they demand to part with it once they own it. The ownership transforms the item from a commodity into a part of the self. Loss aversion makes the prospect of parting with it feel like a personal deprivation.
Your possessions are an extension of your self-worth.
Where this comes from
- Study
- Kahneman, Knetsch, and Thaler, 1990, Journal of Political Economy
- What the check found
- The phenomenon is well-documented in the cited literature, though the interpretation of why it occurs (loss aversion vs. inertia/transaction costs) remains a subject of active debate.
- Confidence
- Well replicated
Related
One of these every day, and every one names the study it came from. When a finding is contested, it says so.