0 saved
9K views
No, it's not just you — we all tend to overestimate the value of our possessions, and there's a name for it.
Primum quid tu dicis breve? Nemo nostrum istius generis asotos iucunde putat vivere. Quis enim confidit semper sibi illud stabile et firmum permansurum, quod fragile et caducum sit? An vero displicuit ea, quae tributa est animi virtutibus tanta praestantia? Hic nihil fuit, quod quaereremus. Quia nec honesto quic quam honestius nec turpi turpius. Sine ea igitur iucunde negat posse se vivere? At enim sequor utilitatem.
Haec et tu ita posuisti, et verba vestra sunt. Hoc est dicere: Non reprehenderem asotos, si non essent asoti. Qui est in parvis malis. Luxuriam non reprehendit, modo sit vacua infinita cupiditate et timore.
- Be mindful of the endowment heuristic in sales conversations.
When purchasing something, be aware ...
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Iam illud quale tandem est, bona praeterita non effluere sapienti, mala meminisse non oportere? Voluptatem cum summum bonum diceret, primum in eo ipso parum vidit, deinde hoc quoque alienum; Stoici autem, quod finem bonorum in una virtute ponunt, similes sunt illorum; Duo Reges: constructio interrete. Quod autem in homine praestantissimum atque optimum est, id deseruit. Restincta enim sitis stabilitatem voluptatis habet, inquit, illa autem voluptas ipsius restinctionis in motu est. Isto modo, ne si avia quidem eius nata non esset. Nos quidem Virtutes sic natae sumus, ut tibi serviremus, aliud negotii nihil habemus.
Nemo igitur esse beatus potest. Inquit, dasne adolescenti veniam? Ut proverbia non nulla veriora sint quam vestra dogmata. Bork Respondeat totidem verbis. Fortasse id optimum, sed ubi illud: Plus semper voluptatis?
Re mihi non aeque satisfacit, et quidem locis pluribus. Zenonis est, inquam, hoc Stoici. Non enim iam stirpis bonum quaeret, sed animalis. Et quidem iure fortasse, sed tamen non gravissimum est testimonium multitudinis. An vero, inquit, quisquam potest probare, quod perceptfum, quod. Nos quidem Virtutes sic natae sumus, ut tibi serviremus, aliud negotii nihil habemus.
There have been critics of the Endowment Heuristic, with some claiming it does not exist or at least is not as apparent in real life as in fixed experiments. For example, some argue that the results from the mug experiment (see the ‘In Practice’ section) was more due to artificial scarcity.
Mugs.
This 1991 paper by Daniel Kahneman, Jack Knetcsch and Richard Thaler describes the classic example of the endowment heuristic involving mugs. In it, participants were given a mug and then given the chance to trade it. They found that the value attributed to owned mugs was twice as high as they were actually willing to pay for such a mug that they did not own.
The endowment heuristic is part of behavioural economics, stemming from the fast and slow thinking mental model and relating closely to loss aversion.
Use the following examples of connected and complementary models to weave availability heuristic into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Fast and slow thinking: providing broader context to the endowment effect.
- Loss aversion and opportunity cost: a closely linked heuristic and bias.
- Lock in effect: and challenge of customer loyalty.
Complementary models:
- Design thinking: consider strategies to co-design and increase ownership of initiatives.
- Lean startup: iterating with minimum viable products, allowing audience groups to access and own quickly and cheaply.
Aristotle noted the tendency towards the Endowment Effect in Ancient Greece, when he explained: “For most things are differently valued by those who have them and by those who wish to get them: what belongs to us, and what we give away, always seems very precious to us.”
However, the term itself was first coined by the behavioural economist Richard Thaler in his 1980 paper entitled ‘Toward a Positive Theory of Consumer Choice.’
My Notes
Oops, That’s Members’ Only!
Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.
ModelThinkers membership at a glance:
“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”
You Might Also Like:
- Actionable summaries of the world's most powerful ideas.
Subscribe now and download this practical guide to transform your thinking, plus recieve one short, powerful and actionable idea in your inbox each month.