We tend to overvalue what we already own from "summary" of Predictably Irrational, Revised by Dan Ariely
Consider the following scenario: you are in possession of a concert ticket that you bought for $100. You suddenly find out that the concert is not as appealing as you originally thought. Now, if someone offers you $80 for the ticket, you might hesitate to sell it. Why is that?It turns out that we have a tendency to overvalue what we already own. This phenomenon is known as the endowment effect. Once we possess something, we attach a higher value to it than we did before we acquired it. This is why you might feel reluctant to part with your concert ticket for $80, even though you wouldn't have paid that much for it if you didn't already own it. The endowment effect is a powerful force that influences our decision-making processes. It can lead us to make irrational choices based on our emotional attachment to the things we own. This effect is not limited to physical possessions; it can also apply to intangible assets like ideas or beliefs. One possible explanation for the endowment effect is loss aversion. We are more sensitive to potential losses than gains, so the thought of giving up something we possess feels like a loss. This emotional response can cloud our judgment and cause us to overvalue our possessions. Understanding the endowment effect can help us make more rational decisions. By recognizing that our attachment to what we own may be influencing our perception of value, we can take a step back and consider the situation more objectively. This awareness can help us avoid making decisions based solely on our emotional attachment and make choices that align more closely with our true preferences.
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