The Psychology of Value

What do you think is more valuable, the price of these rings in the picture, or, the relationship symbolised by them?

No rush to answer! How about the question below instead, as a continuation from yesterday’s post:

If I gifted you a Swiss chocolate bar to begin with then a few moments later asked if you’d like to swap that chocolate bar for a new white coffee mug, would you do it?

I didn’t think so either, so why is this? Maybe you like chocolate more than mugs (same here)? But the psychology behind ownership  isn’t that straightforward. In a study by Kahneman, Knetsch and Thaler, when the experiment was conducted in the both the way outlined  above and also the opposite i.e. when students given mugs first were then asked if they wanted to swap it for some of Switzerland’s finest cocoa products, the majority refused to swap the item they were initially given for the item up for grabs in return. So why is this?

Scientists believe it may be  because of the psychological phenomenon known as the ‘Endowment Effect’. Which put simply is the idea that people place more value on something they ‘own’ than the very same object which they have not inherited. For example, say we had two identical water bottles. If I were to give you one and ask you a few moments later if you’d like to swap. Chances are you wouldn’t, even when knowing the two items are basically equal in value in terms of money and use.

But that’s just it. The intrinsic value that your water bottle has to you is more than that of my water bottle.  In those precious few minutes you held your gifted bottle you developed an ‘attachment’ to it. This attachment idea stems from childhood: It is theorized that throughout our childhood, we grew accustomed to placing value to particular objects, be it a certain blanket or a toy,  as if believing that they have a ‘unique’ essence.

Not limited to the imaginations of our juvenile selves, this trait follows us into adulthood and if anything becomes more elaborate.From celebrity memorabilia to refusing to detach ourselves from the possessions of passed loved ones, it’s as if we feel better connected to these individuals through their materialistic items.

When it comes to ownership, culture also plays a part.

Explained in tomorrow’s post!