Psychology of Decisions
What is Endowment Effect?
Valuing something more simply because you own it, so you demand more to give it up than you would have paid to get it.
Go deeper
Read the full deep-dive that explains Endowment Effect in context - with examples, mechanics, and where it breaks.
Related terms
- System 1 Thinking Fast, automatic, effortless thinking that handles most daily decisions using shortcuts; efficient but predictably error-prone.
- System 2 Thinking Slow, deliberate, effortful analysis that can override System 1's errors but tires quickly - which is why good defaults matter so much.
- Heuristic A mental shortcut that makes judgment fast and usually good enough, but fails in predictable, named ways when the situation doesn't fit the rule of thumb.
- Confirmation Bias Noticing and remembering only the evidence that fits what you already believe, while quietly discounting everything that disagrees.
- Anchoring Bias Leaning too hard on the first number you see when estimating something; you adjust away from it but almost never far enough.
- Framing Effect When the wording of a choice changes which option you pick even though the facts are identical - "90% fat-free" and "10% fat" describe the same food.