The Endowment Effect
“Losses are more bad than gains are good”
When something is given to you, it becomes part of your “endowment”. Taking a risk and losing it would be more detrimental than a potential gain.
Examples:
When purchasing a car, in one condition you are offered a model fully loaded with all the features. You are then allowed to strip the features from the car to receive your money back. In condition 2, you are given a car with no additional features and are allowed to add on options at an extra charge.
Studies prove that people in the first condition end up with many more features than people in the second condition.
This is because when given a car fully loaded, all the features become part of your endowment. The feeling of removing a feature, such as $400 stereo system, is very negative. However, if you are not given that feature to start, the emotional gain from adding a stereo system might not be strong enough to actually have you go ahead with that.
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Paraphrased from The Paradox of Choice
