The endowment effect describes a circumstance in which an individual places a higher value on an object that they already own than the market value. As a seller tries to overcharge a buyer for something they own, as they are more focused on losing that item than the money they might miss out on if the buyer doesn't agree to their price.It can be clearly seen related to emotional or symbolic significance to the individual
This effect is often associated with loss aversion(損失規避) and ownership. The fact that we own something will make us fear losing it more than enjoying gaining something else. Since loss aversion plays a vital role in the endowment effect, we tend to stress more on what we may possibly lose rather than what we may potentially gain. As a result, when making some decisions, this effect causes us biased and dire consequences.
Even though something may not belong to us, yet we may feel it belongs to us. We may develop a sense of ownership over something that isn't necessarily ours. As a result, sometimes by being allowed to touch a thing before buying gives people a sense of ownership.
Apart from that, this effect may lead to investors making bad decisions blinded by their inherent bias and the false value they attach to an object.
Certain ways to avoid falling victim to this effect:
1. Set up reasonable prices, try to set a price that will be viable for the customer
2. Take suggestions from unbiased professionals
3. Keep an open mind towards changes, accepting a change might open gates for potential gains for you
4. Look for opportunities where you can use it to your advantage by triggering a sense of ownership, exploring offers like free trials, and trying and buy to attract buyers.