The Endowment Effect

There is quite a bit of scientific research on how our psychology changes when we believe we own something. Much of it is summed up in what Academics call the Endowment Effect.

In his book Thinking: Fast and Slow, Economics Nobel Prize Laureate Daniel Kahneman describes how a certain well-respected academic and wine lover becomes very reluctant to sell a bottle of wine from his collection for $100, but would also not pay more than $35 for a wine of similar quality.

This made little economic sense because the same or similar wine should hold the same value in a person’s mind. The purchasing price and selling price should be roughly the same, deducting transaction costs. This illustrates that when a person starts to own something, they immediately place more value on that item relative to others who don’t own it.

Researchers Dan Ariely and Ziv Carmon took this concept further by testing it on Duke University students who were avid basketball fans and...