People are endlessly fascinating. No two the same, yet all operating under the same driving principles. We’ve done a bit of digging into the troves of behavioural science, and have decided to dedicate the next couple of weeks to debunking the most interesting theories and experiments for you.
We’re confident that by the end of it you’ll feel even more dumbfounded / confused / inspired by the human condition, and may or may not begin to analyse your every move…
Social science study number 1:
The Endowment Effect:
This behavioural psychology theory was first discovered by economist Richard Thaler in the late 1970’s, after he observed the processes by which consumer choices were influenced by the economic value people ascribed to an item in their possession.
What he found was that humans typically place greater economic value on things simply because they own them, and are therefore attached to a certain story, ideal, or memory related to them. Sounds reasonable right? But the research has revealed quite an absurdity…That even those who underwent experiments and therefore only owned the item for no longer than a few minutes still believed it was therefore worthy of greater economic gain than those participating as buyers were willing to offer. The conclusions to a multiple number of studies have all come to this: “people will tend to pay more to retain something they own, than to obtain something they do not own—even when there is no cause for attachment.”
So how come?
Theoretical explanation puts it down to human nature, and a concept that is known as Loss Aversion.
As humans, we are inherently loss-averse. We dislike comfort, and dislike relinquishing anything we believe gives us a sense of purpose, meaning and identity in the world. Deep down, we all believe that the memories and moments we hold are of greater significance than the next persons, and we therefore have a sound right to demand higher gains. For example – selling the car you learned to drive in would be hard for you. It’s has been so good to you all these years, you’ve taken it on many roadies, done many late night McDonalds drive through runs with friends, and it’s been your safe zone to sing your lungs out while driving home from work. But when it comes time to consider buying a strangers second hand vehicle, “it’s probably a massive rip off, with x,y and z going wrong.” So much so that if someone were to place the same accusations on your beloved car you would be more than offended.
Another real life arena in which we can see the endowment effect play out is in relation to our dating habits. This was recently highlighted in NPR’s Hidden Brain podcast series. They reviewed a valentines day experiment that uncovered men and women’s resistance to part with contact information attained from a potential dating partner, unless the price offered for it was almost 5 times the price at which it was purchased.
Another example could be observed through the behavioural patterns associated with hoarding. Say you take a seemingly useless and unimportant item from the mantel piece and hide it for 6 weeks, knowing a member of your family has hoarding tendencies. After 6 weeks, you place it back in the original spot and then discuss with that family member your thoughts on perhaps getting rid of it from the home. The response would likely be one of assured attachment and a desperate plea to keep it because they are convinced they could not ever live without it, unbeknownst to the truth they had not noticed it’s absence for the past 6 weeks.
‘Our things only hold the value we give to them.’ – The Minimalists
How does marketing manipulate us by taking advantage of this?
One website explains:
“This cognitive bias is of particular interest, because it has implications for how eonomies work. You can see why car-salespeople are keen for you to take a test-drive before you purchase, or why shops are happy to offer a money-back-with-no-questions-asked option. You figure the money-back option into your cost-benefit calculation about whether to take something home, but once you’ve got it home your preferences realign – that item is now “yours”, so you’re far less likely to take it back to the shop, even if it doesn’t turn out to be as good as you thought when you bought it.”
Well the endowment effect seems fairly inescapable, doesn’t it? Perhaps we’re best to laugh at ourselves next time we demand $20 for that favourite mug we bought for $7 at the Salies 5 years ago. Let’s all just acknowledge and accept that we are a lovely big bunch of strange and complex beings, people of Societe!
And remember to keep our wits about us next time we take a nice car for a test drive…
Bottom image: Henri Rousseau – Le Petit Chevalier (Don Juan). 1880