The Endowment Effect: Why We Overvalue What We Already Own
The Hidden Bias in Your Sense of Value Ever tried to sell something you own—like an old phone, a jacket, or a car—and felt insulted by every offer? That’s not sentimentality; it’s psychology. The Endowment Effect is the cognitive bias that makes us assign greater value to things simply because they’re ours. First identified by Nobel Prize–winning economist Richard Thaler in 1980, it explains why people demand more money to give up an item than they would ever pay to acquire it. Ownership, it turns out, changes perception.
When Possession Creates Attachment
In one of the most famous experiments on this effect, participants were given mugs and later asked to sell them. Others were asked to buy. Despite identical items, sellers valued their mugs at roughly twice the price buyers were willing to pay. The moment ownership began, value inflated. Neuroscientists believe this stems from loss aversion, a key idea in behavioral economics. The brain registers potential losses more intensely than equivalent gains, so giving something up feels worse than not getting something new.
The Brain’s Wiring for Loss
Functional MRI studies show that when people anticipate losing something they own, regions of the brain associated with pain and threat—such as the insula and amygdala—activate. This emotional charge makes losses loom larger than logic would dictate. In evolutionary terms, this bias once helped humans safeguard resources critical to survival. Today, it manifests in everything from overpriced collectibles to our reluctance to delete apps, unsubscribe from services, or let go of old clothes “just in case.”
Beyond Objects: How It Warps Decisions
The Endowment Effect doesn’t stop at possessions. It influences how we value opinions, ideas, and even relationships. We cling to business strategies we built, defend viewpoints we once tweeted, and stay loyal to routines that no longer serve us—all because we own them in some psychological sense. Studies in organizational behavior show that founders and managers overvalue their own projects by as much as 60% compared to outside evaluators. The same mental bias that helps us protect what’s ours also keeps us stuck with what no longer works.
