Endowment Effect
Endowment Effect is when you think something you own is worth more than it really is.
You have a cookie on your plate. You baked it, so you'd ask a dollar for it. A friend offers 50 cents, and that feels too low. But if that cookie were on their plate, 50 cents would sound fair to you.
Explaining endowment effect by grade level
Think about a toy you got at a trade fair. You might not want to trade it, even for a toy that costs more. Once you hold something, it feels more special to you. Other people do not feel that same pull toward your toy.
Projects that explore endowment effect
People tend to place a higher price on items they own than on identical items they do not. To measure this, you divide participants into two groups and give each person a mug. One group is told the mug is a gift; the other is told to return it after the experiment. When both groups estimate the mug's value, you can compare the two sets of estimates to see whether ownership changes how people judge worth.
Does owning something make you less willing to trade it away? You split participants into two groups and give each person the same mug. One group keeps the mug as a gift; the other is told it is just for use during the experiment. Then you bring everyone together for five minutes to trade mugs if they want. By recording which group trades more often, you can see whether ownership changes how people value things — the tendency known as the endowment effect.