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Saturday, 19 May 2012

What is your way worth?

By Christopher Aesoph, MA    

      If you’re like most of us, your way of doing something may be more valuable to you than to anyone else. In one study, half the people in a group were given free coffee mugs. The group without mugs was asked how much they would pay to own one of the mugs. Then, the mug-holders were asked how much they would expect to be paid for the mug. Overall, the mug-owners valued their mugs twice as much as the non-mug holders, even though the mug had been given for free, and they had only possessed it for under 30 minutes.

In another study, free tickets to a sporting event were handed out, and again, the ticket holders and non-ticket holders compared ticket values. Ticket holders, who had just received the tickets for free, asked up to 14 times as much as what the non-ticket holders offered.

This phenomenon of overstating the value of what we possess, is called the Endowment Effect.*

This is one important factor to take into consideration when asking a group or an organization to change. Although the effort to change may result in improvements, one must remember that most people will tend to overvalue the old way, even when it’s just plain wrong.

*KAHNEMAN, D., J.L. KNETSCH and R.H. THALER, 1990. Experimental tests of the endowment effect, Journal of Political Economy.

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