background preloader

Endowment effect

Endowment effect
In behavioral economics, the endowment effect (also known as divestiture aversion) is the hypothesis that people ascribe more value to things merely because they own them.[1] This is illustrated by the observation that people will tend to pay more to retain something they own than to obtain something owned by someone else—even when there is no cause for attachment, or even if the item was only obtained minutes ago. Examples[edit] One of the most famous examples of the endowment effect in the literature is from a study by Kahneman, Knetsch & Thaler (1990)[2] where participants were given a mug and then offered the chance to sell it or trade it for an equally priced alternative good (pens). Kahneman et al. (1990)[2] found that participants' willingness to accept compensation for the mug (once their ownership of the mug had been established) was approximately twice as high as their willingness to pay for it. Background[edit] Theoretical explanations[edit] Loss aversion[edit] Criticisms[edit] Related:  Loss Aversion

The Most Important Question You Can Ask - Tony Schwartz by Tony Schwartz | 8:52 AM February 9, 2012 Why are you here? It’s arguably life’s most important question, but is it one you ask yourself? I recognize it’s a question some people might view as self-indulgent, while others would see it primarily through a religious lens. But is there any part of an answer we could all agree on? I’ve found a very simple one for myself, and it’s provided me in recent years with an increasingly powerful sense of clarity, inspiration and even joy. I use up resources every day — the gas I burn driving my car, the heat and electricity for my house and office, the food I eat. I spent the first 45 years of my life accruing value — trying to earn enough money to feel financially secure, sufficient success to feel respected, and enough relationships to feel safe and loved. To the extent that I felt I didn’t have enough, I didn’t imagine I had a choice about how to live my life. I believe in the law of reciprocity. I’m inspired by her. I fall short, frequently.

What Is Loss Aversion? Source: By Tomwsulcer (Own work) [CC0], via Wikimedia Commons We don’t like to lose things that we own. We tend to become extremely attracted to objects in our possession, and feel anxious to give them up. Ironically, the more we have, the more vulnerable we are. Having accumulated wealth implies that we have more to lose than to gain. However, emotion regulation, such as taking a different perspective, can reduce loss aversion and help people overcome potentially disadvantageous decision biases. Why are we so afraid of losing? We are more upset about losing $10 than we are happy finding $10. The idea of loss aversion is shown in consumer behavior. The principle of loss aversion also applies to the emotional pain of scaling back. Ownership is not limited to material things, it also applies to ideas. Even our views of mate value change the more time we spend together. In a nutshell, the loss aversion is an important aspect of everyday economic life. What is the cure?

How to Start the Big Project You've Been Putting Off - Peter Bregman I want to write a screenplay. I wanted to write one last year, but other work took more time than I expected, and I kept pushing “write screenplay” off my to-do list. I know I’m not alone in struggling to make incremental progress on long-term projects or goals. How do you get started when you have “all the time in the world”? Maybe you have a project with no deadline, like my screenplay. Or maybe you have a deadline that’s months away — like preparing a speech, developing a business plan, or designing a training program. Doing something big and important is rarely as simple as just getting it done. I know the basic advice: break the work into smaller, more manageable chunks, focus on the next small step that will move you forward, set intermediate deadlines. It’s good advice. Because, ultimately, the reason we procrastinate on a big, long-term project isn’t just because we have too much time or don’t know where to start. I’ve never written a screenplay. I’m afraid. So what’s the antidote?

Dopamine Suppression and the Neuroscience of Giving Up A new study in mice suggests that dopamine-suppressing nociceptin neurons in the brain's reward-and-motivation center (called the ventral tegmental area) become very active just before a mouse reaches a breakpoint when it gives up on exerting effort to receive a sugary treat. According to the authors, nociceptin is "a complex molecule that suppresses dopamine, a chemical largely associated with motivation." This paper, "A Paranigral VTA Nociceptin Circuit That Constrains Motivation for Reward," was published July 25 in the journal Cell. article continues after advertisement Source: Pexels We all know the deflated feeling of realizing that a dream or goal you've been working toward is out of reach and unattainable. As an ultra-endurance athlete, I know from experience that the sudden urge to give up often seems to come out of nowhere. At first, one nose poke dispensed some sucrose, then it took two nose pokes, then five, and so on. Source: Max Huffman

The Disadvantages of an Elite Education Exhortation - Summer 2008 Print Our best universities have forgotten that the reason they exist is to make minds, not careers By William Deresiewicz June 1, 2008 It didn’t dawn on me that there might be a few holes in my education until I was about 35. It’s not surprising that it took me so long to discover the extent of my miseducation, because the last thing an elite education will teach you is its own inadequacy. I’m not talking about curricula or the culture wars, the closing or opening of the American mind, political correctness, canon formation, or what have you. The first disadvantage of an elite education, as I learned in my kitchen that day, is that it makes you incapable of talking to people who aren’t like you. But it isn’t just a matter of class. I also never learned that there are smart people who aren’t “smart.” What about people who aren’t bright in any sense? There is nothing wrong with taking pride in one’s intellect or knowledge.

Why the Most Important Idea in Behavioral Decision-Making Is a Fallacy Loss aversion, the idea that losses are more psychologically impactful than gains, is widely considered the most important idea of behavioral decision-making and its sister field of behavioral economics. To illustrate the importance loss aversion is accorded, Daniel Kahneman, winner of the 2002 Nobel Prize in economics, wrote in his 2011 best-selling book, Thinking Fast and Slow, that “the concept of loss aversion is certainly the most significant contribution of psychology to behavioral economics.” As another illustration, when Richard Thaler was awarded the 2017 Nobel Prize in economics, the phrase “loss aversion” appeared 24 times in the Nobel Committee’s description of his contributions to science. Why has such profound importance been attributed to loss aversion? Largely, it is because it is thought to reflect a fundamental truth about human beings—that we are more motivated by our fears than by our aspirations.

Supplement Manufacturers, Vitamin Manufacturers - The Endowment Effect A strange thing happens in the mind when you buy something. No matter what it is—a pair of jeans, a car or even a house—in that moment when an object becomes your property, it undergoes a transformation. Because you chose it and you associate it with yourself, its value is immediately increased (Morewedge et al., 2009). If someone offers to buy it from you, the chances are you want to charge much more than they are prepared to pay. That is a cognitive bias called ‘the endowment effect’. It’s the reason that some people have lofts, garages and storage spaces full of junk with which they cannot bear to be parted. When tested experimentally the endowment effect can be surprisingly strong. The endowment effect is particularly strong for things that are very personal and easy to associate with the self, like a piece of jewellery from your partner. Sometimes, of course, the sentimental value of things is justified; but more often than not people hold on to old possessions for no good reason.

3 Words That Guarantee Failure People who fail to achieve goals almost always signal their intent to fail by using three little words: "I will try..." There are no three words in the English language that are more deceptive, both to the person who says them and the person who hears them. People who say "I will try" have given themselves permission to fail. No matter what happens, they can always claim that they "tried." People who hear "I will try" and don't realize what it really means are fooling themselves, by thinking there's a chance that the speaker will actually succeed. People who really and truly achieve goals never say "I will try." Instead, they always say "I will do" something–or, better yet, "I must do" whatever the task is. As a wise (though fictional) guru once said: "Do, or do not.

16 Things I Wish They Had Taught Me in School I am 28 now. I don’t think about the past or regret things much these days. But sometimes I wish that I had known some of things I have learned over the last few years a bit earlier. That perhaps there had been a self-improvement class in school. Because some of these 16 things in this article a teacher probably spoke about in class. Some of it would probably not have stuck in my mind anyway. But I still think that taking a few hours from all those German language classes and use them for some personal development classes would have been a good idea. So here are 16 things I wish they had taught me in school (or I just would like to have known about earlier). 1. This is one of the best ways to make better use of your time. So a lot of what you do is probably not as useful or even necessary to do as you may think. You can just drop – or vastly decrease the time you spend on – a whole bunch of things. 2. You can do things quicker than you think. So focus your time on finding solutions. 3. 4.

Macho Cultures Are Fairer for Women - Avivah Wittenberg-Cox by Avivah Wittenberg-Cox | 12:08 PM April 27, 2012 In the past decade, and long before Dilma Roussef was elected the country’s first female (and wildly popular) President, Brazilian women have been on the rise. As in many other countries, women now outnumber men in the country’s universities. But the female edge in education (63% vs 37%) in Brazil is at the top of the scale, next to Sweden’s. Just as significantly, there has been a big move of women into the paid labor force in Brazil, and in Latin America more generally. “The female employment-to-population ratio in Brazil,” writes the ILO, “increased by 3.8 percentage points between 2000 and 2010. How will Brazilan society cope with this shift in gender roles? In the 2012 Grant Thornton survey of the gender balance in senior executive roles, for example, Brazil had 27% women and 73% men, compared to the US with 17% women and 83% men. How come? The Brazilians never fell into this trap. My experience on this trip confirmed my guess.

Banned “Tax the Rich” TED Talk slides and text here For those of you wondering if there's ever a TED Talk that presents an idea too controversial for the group to publish it, there definitely is, and venture capitalist Nick Hanauer was the one to make it. What we've got here is the full text of the TED Talks presentation Hanauer made at the March TED University conference as well as the full set of slides he presented at the conference. We do not have the video for this TED Talk because TED officials have decided not to publish it, not streaming, not for download, and certainly not for consumption on Netflix or your iPad app. This TED Talk speaks on how widening income inequality is bad in the United States (and abroad, for that matter), and how the rich should pay more in taxes. This speech was made on the 1st of March, but according to the National Journal, TED officials just this month (May 2012) told Hanauer that his remarks were both too controversial and too "political" for them to post.

Las ficciones malignas | Opinión Los seres humanos no pueden vivir sin ficciones —mentiras que parecen verdades y verdades que parecen mentiras— y gracias a esa necesidad existen creaciones tan hermosas como las bellas artes y la literatura, que hacen más llevadera y enriquecen la vida de las gentes. Pero existen ficciones benignas, como las que salieron de los pinceles de un Goya o de la pluma de un Cervantes, y malignas, que son aquellas que niegan su naturaleza subjetiva, ideal e irreal y se presentan como descripciones objetivas, científicas, de la realidad. En los últimos tiempos hemos tenido muchas ocasiones de ver los efectos perniciosos que las ficciones malignas, difundidas por algunos gurús procedentes de la economía sobre todo, pueden tener sobre la vida social. Una de las ficciones malignas que, desde la Edad Media, circula como un tópico, en la cultura europea es la de la decadencia de Occidente. Se presenta a la señora Merkel como un ser insensible, para la que sólo cuentan los números