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A typical behavioral pattern of investors is to reduce stock market exposure after a crash. We suggest a simple nudge based on the IKEA effect and the endowment effect that reduces this problem substantially: In case of a market crash, stockholders who have chosen their own portfolios are more likely to stick with their investment choices.
While the endowment effect suggests that mere ownership of a product increases its value to individuals, the IKEA effect is evident when invested labor leads to inflated product valuation (Norton et al., 2012). For example, experiments show that the monetary value assigned to the amateur creations of self-made goods is on a par [...]
* This introduction was originally published in the Behavioral Economics Guide 2014. To learn more about the subject and the latest ideas, please download our free annual Behavioral Economics Guides. By Alain Samson, Ph.D. Introduction Think about the last time you purchased a customizable product. Perhaps it was a laptop [...]
There are “moral meanings” that people ascribe to objects in white and black colors. We show that consumers see buying a product in white color as an act that is morally good and buying a product in black color as an act that is morally bad. Those who buy white-colored products feel licensed to behave less prosocially afterward, while those who buy black-colored products are more prosocial as they feel a need to compensate for their initial misconduct.
