Analysing your IQ
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AKA: "Ownership Bias"
People value things more highly simply because they own them.
Endowment Effect is one of the most common cognitive errors—and one of the hardest to spot in yourself. This page explains what it is, why your brain does it, and how to mitigate it.
You wouldn't pay $10 for a mug, but once you own it, you wouldn't sell it for $10. Ownership inflates value.
High-stakes domains (medicine, law, finance) have developed entire systems to counteract Endowment Effect. If professionals need safeguards, so do you.
This error is driven by Loss aversion applied to ownership: losing what you have feels worse than not gaining what you don't..
This bias exists because human brains evolved for survival, not accuracy. Loss aversion applied to ownership: losing what you have feels worse than not gaining what you don't. served our ancestors well. In modern contexts, it often misfires.
In investing: Endowment Effect leads to holding losing positions too long or selling winners too early.
In relationships: This bias causes people to interpret ambiguous signals in ways that confirm existing beliefs about partners.
In work: Endowment Effect makes it harder to update strategies when market conditions change.
In health: People ignore symptoms that contradict their self-image as "healthy" or "young."
The scientific literature on Endowment Effect spans behavioral economics, cognitive psychology, and decision science. The finding is robust across cultures and contexts.
Ask: "If I didn't own this, what would I pay for it?" Apply the same standard to selling.
Seek disconfirming evidence: Actively look for data that challenges your current belief.
Use decision journals: Write down predictions before outcomes are known, then review accuracy.
Consult diverse perspectives: People with different backgrounds spot different biases.
Implement decision rules: Pre-commit to criteria before emotionally charged situations arise.
Time-box decisions: Revisit important conclusions after a cooling-off period.
Some brains are more susceptible to this than others. Test your Discipline to find out.
People value things more highly simply because they own them.
The alternate name "Ownership Bias" captures the intuitive essence of the bias. Endowment Effect is the formal psychological term, while "Ownership Bias" describes what it feels like in practice.
Ask: "If I didn't own this, what would I pay for it?" Apply the same standard to selling.
The underlying mechanism is loss aversion applied to ownership: losing what you have feels worse than not gaining what you don't.. Human brains evolved heuristics for speed and survival, not accuracy in modern contexts.
Yes. Intelligence doesn't provide immunity—sometimes it makes the bias worse because smart people are better at rationalizing. Awareness and structured decision processes are more protective than raw IQ.
You wouldn't pay $10 for a mug, but once you own it, you wouldn't sell it for $10. Ownership inflates value.