Comments on: The endowment effect

By: Dennis Friesen-Carper

Dennis Friesen-Carper — Fri, 17 Jul 2009 19:28:32 +0000

For me, the coffee mug vs. chocolate (I love both) choice is based on future utility. I see the difference between the two being a difference of ‘kind’ rather than difference of value. Give someone chocolate and they can enjoy caffeine, milkfat and sugar for a day. Give them a coffee cup and they can provide it for themselves for a lifetime. The coffee cup is the ‘mature’ choice, giving up short-term satisfaction for future sustenance.

By: Maggie

Maggie — Fri, 17 Jul 2009 12:50:25 +0000

I do think this explains yard sale pricing!! Sure, some people will get rid of things, but assign a sale price clearly above actual market price.

By: Christins

Christins — Wed, 16 Jul 2008 20:57:35 +0000

I think this explains my mother-in-law. When it comes times for her to sell something of hers, its worth its weight in gold, but when it comes time for her to buy something, she wants the rock bottom price. And this is true even though most of the things she has are so worn out and out dated that they are really just worthless, she wants to at least make back what she originally paid for it, plus some.

Can you imagine? If she paid $100 for a bike 25 years ago (no joke) she doesnt see why she can’t see it for $150 today. But if she came across a brand new barley used bike at a yard sale, she’d give $5 for it and still say she paid to much.

Absurd.

By: Pat

Pat — Wed, 16 Jul 2008 03:45:54 +0000

“My only problem with the author’s explanation of the endowment effect is that it doesn’t acknowledge that people (like the trader in the article) will part with goods.”

The endowment effect doesn’t say that people won’t part with goods. Just that people’s valuations of goods depends on whether they view themselves as owning the goods or not. This helps explain the reluctance of people to give up a good they already have in exchange for a good they *otherwise* would hold to be of greater value.

Once the value of the other good (whether it be money, a barter item, or the space/upkeep/monetary savings associated with getting rid of it) reaches a certain point (which depends on the person), people will let go. The point of the endowment effect is that this value is higher than it would be if humans were perfectly rational economic agents.

By: battra92

battra92 — Wed, 16 Jul 2008 02:20:07 +0000

Well, considering I can freely part with things I don’t want for things I want (I can very easily swap things) it’s the getting rid of things and getting nothing in return that is difficult.

By: Sue

Sue — Tue, 15 Jul 2008 22:16:37 +0000

A group of friends host a Christmas party every year at the END of December, and each guest brings a wrapped white elephant gift. Could be something great, something tasty or something you want to regift. We draw numbers and go up in numerical order to pick a gift; you can steal someone else’s unwrapped gift or pick from the table.

The strategies and negotiations that I’ve seen at these parties would be a great study!!!

By: Sue

Sue — Tue, 15 Jul 2008 22:11:17 +0000

Did they re-do the experiment and give them the chocolate first to see if the idea of “possession” was simply attached to the first acquired object or because the mug was non-consumable and reusable?

By: K

Tue, 15 Jul 2008 22:01:30 +0000

Ok… I just realized you linked to it several months ago… sorry!

By: K

Tue, 15 Jul 2008 21:33:55 +0000

Did you watch the video noted in the comments on the economist article? The video is on vimeo and is called “Possessed” by Martin Hampton.

Zowie.

http://www.vimeo.com/603058?pg.....sec=603058

By: Erin Doland

Erin Doland — Tue, 15 Jul 2008 20:41:21 +0000

@Sue — I would wholeheartedly agree with you regarding objects that we buy … but it doesn’t explain the weird phenomenon with the mug vs. chocolate scenario. If something is simply handed to you, why make the connection to the object in hand? I find that fascinating.

By: Sue

Sue — Tue, 15 Jul 2008 20:02:34 +0000

“….once someone owns something, he places a higher value on it than he did when he acquired it…”

Perhaps because now I perceive that the item has its own original value **plus** the value of the time/labor I had to perform to obtain the money to acquire it?

By: DJ

DJ — Tue, 15 Jul 2008 18:19:18 +0000

What’s that old saying?

A bird in the hand is worth two in the bush.

By: jocelyn

jocelyn — Tue, 15 Jul 2008 17:23:24 +0000

I wonder if this is the middle point of the spectrum: hoarders on one end (for whom mental alarms go off if asked to throw out junk mail) , purgers on the other, with the bulge of the bell curve being people who feel a slight pang when they do contemplate getting rid of something, but can nonetheless do it sometimes.

It also makes me wonder about purgers and why they do it. For me, holding onto stuff feels like holding onto dead skins. It’s from the past and I can’t tolerate having it around anymore. If I were a true minimalist, I would run out of stuff to purge. My husband says it makes him think of Piglet in his little boat when the hundred acre wood is flooding and he’s trying to bail out his boat with a spoon -except that with me, for every spoonful I dump out on one side of the boat, I put another one in from the other side.

This article was fascinating; thanks for putting it up.