Post by account_disabled on Feb 25, 2024 9:47:17 GMT
Have you ever wondered why you continue to keep that old sweater in the wardrobe that you liked so much when you were younger? If it's not a sweater, it could be a cushion, a clock radio or an unlikely ornament bought at Camden Town market in London in the 1990s. The reason is simple and it's called loss aversion. We would like to get rid of a lot of junk, but our brain continues to hold us back, suffers in silence and just can't get rid of it. Today I want to start from this banal and simple observation to deal with a little-known topic, between neuromarketing, behavioral economics and psychology, which can help us in understanding some of our "paradoxical" decision-making processes, but can also be used in the implementation of our digital marketing strategies: the endowment effect.
What is meant by Endowment Effect? In the Chinese Student Phone Number List context of behavioral economics, the endowment effect represents the tendency of people to attribute more value to an object just because they own it . The endowment effect therefore consists of the "discrepancy between the valuation given to a good if one owns it and the valuation given to the same good if one does not own it." In general, loss aversion is the trigger that would give rise to the endowment effect . And this is because people experience opportunity costs as simple lost earnings, while out-of-pocket costs as real losses. This bias (or anomaly) is caused by our inability to consider the opportunity cost (i.e. the money you give up by not selling it) of the asset you own in the same way as the out-of-pocket costs you have to face to purchase an asset you don't own.
For further information: mental accounting theory and the endowment effect Can loss aversion influence our decision-making processes even during the purchasing phase? Some systematic biases have been recognized at the basis of many human decision-making processes (not only linked to purchasing moments), including one of the most decisive and the aversion to losses . In fact, people do not give the same importance to a gain or a loss of the same size. According to some studies and experimental results ( Experimental Tests of the Endowment Effect and the Coase Theorem by Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler), losing something, due to the endowment effect , but also due to emotional content of the possession which "attaches" a material value to it, has a weight more than double compared to the case in which, for example, it is won.
What is meant by Endowment Effect? In the Chinese Student Phone Number List context of behavioral economics, the endowment effect represents the tendency of people to attribute more value to an object just because they own it . The endowment effect therefore consists of the "discrepancy between the valuation given to a good if one owns it and the valuation given to the same good if one does not own it." In general, loss aversion is the trigger that would give rise to the endowment effect . And this is because people experience opportunity costs as simple lost earnings, while out-of-pocket costs as real losses. This bias (or anomaly) is caused by our inability to consider the opportunity cost (i.e. the money you give up by not selling it) of the asset you own in the same way as the out-of-pocket costs you have to face to purchase an asset you don't own.
For further information: mental accounting theory and the endowment effect Can loss aversion influence our decision-making processes even during the purchasing phase? Some systematic biases have been recognized at the basis of many human decision-making processes (not only linked to purchasing moments), including one of the most decisive and the aversion to losses . In fact, people do not give the same importance to a gain or a loss of the same size. According to some studies and experimental results ( Experimental Tests of the Endowment Effect and the Coase Theorem by Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler), losing something, due to the endowment effect , but also due to emotional content of the possession which "attaches" a material value to it, has a weight more than double compared to the case in which, for example, it is won.