Endowment effect

The endowment effect (Besitztumseffekt) describes the phenomenon that people value things more highly as soon as they own them.

Classic experiment: students were given a coffee mug. Then they were asked to sell it. Result: on average the owners wanted 7 dollars, while buyers offered only 3 dollars. The same object – but ownership doubled its perceived value.

Everyday effects:

• You try to sell your old car for more than it's worth ("It served me faithfully")
• You keep clothes you never wear ("I paid €80 for it")
• You hold on to shares you would never buy if you didn't already own them

Remedy: ask yourself: "Would I buy this item TODAY at the current price?" If not → sell it or give it away.