Endowment effect
Don’t cling to things
Things become valuable the moment we own them.
If we are selling something, we charge more for it than what we ourselves would be willing to spend.
The simple fact of ownership makes us add zeros to the selling price.
In real estate, the endowment effect is palpable. Sellers become emotionally
attached to their houses and thus systematically overestimate their value.
They balk at the market price, expecting buyers to pay more - which is completely
absurd since this excess is little more than sentimental value.
We can safely say that we are better at collecting things than at casting them off.
Amazingly, the endowment effect affects not only posession but also near-ownership.
Winner’s curse
The endowment effect defies all logic.
How to avoid?
- Don’t cling to things
- Consider your property something that the ‘universe’ has bestowed on you temporarily.
- Keep in mind that it can recoup this (or more) in the blink of an eye.