The endowment effect is a psychological bias where people assign greater value to things simply because they own them. This means individuals often overvalue their possessions compared to identical items they do not own, making them reluctant to part with these items even if they wouldn’t have paid as much for them initially. This effect extends beyond physical ownership to the effort and time invested in projects or ideas, increasing perceived value through personal investment, also known as the “Ikea Effect.”

Psychologically, the endowment effect can be explained by loss aversion—the tendency to prefer avoiding losses rather than acquiring equivalent gains—and emotional attachment, which integrates owned items into one’s self-identity. This bias impacts markets, consumer behavior, and negotiations, making people demand higher prices to sell owned items than they are willing to pay for them.

Businesses can leverage the endowment effect through strategies like offering free trials (temporary ownership), involving customers in product co-creation to build psychological investment, and personalizing products to enhance feelings of uniqueness and ownership. These methods increase customer loyalty, perceived value, and ultimately influence decision-making and purchasing behavior.

https://canadiansme.ca/the-endowment-effect-you-make-it-you-own-it/

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