The Daily Decision-16-Endowment effect
Hello Hello This is Dr. Z, Zachary Brooks, with The Daily Decision
because you want to make better decisions.
Today is the SIXTEENTH episode of The Daily Decision
How much is a basic coffee mug worth?
- If you want it, not very much.
- If you have it, very much.
That’s the result of findings from Kahneman, Knetsch & Thaler (1991).
Participants were either owners or buyers. If they simply sat down next to the mug, they suddenly valued the mug at $7.12 on average. If they were asked to act as buyers, they valued the mug at $2.87.
What explains the difference?
The endowment effect. That is people like and value the things they own (or perceive to own) higher than things that they could own.
The next time you try to bargain for something on eBay, remember that owners and buyers value the same item differently.
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As always, Happy Deciding.
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