Endowment effect and loss aversion.

Excessive valuation of what is already owned.

The endowment effect is a psychological phenomenon whereby individuals attribute a much higher value to objects simply because they own them, compared to the value they would assign to them if they were not their own.

This bias suggests that the role of "seller" changes the perspective of value versus the role of "buyer"; when a person owns an asset, the prospect of giving it up is perceived as a loss, which inflates the price he or she would be willing to accept for it.

Research has shown that the asking price demanded by an owner can be as much as double what a buyer would be willing to pay for the same item.

This behavior does not necessarily stem from selfishness, but from a natural resistance to altering the current state of affairs, perceiving any exchange as a risk to the status quo.

The psychological pain of loss versus the pleasure of gain.

Closely linked to the endowment effect is loss aversion.

This principle states that the negative emotional impact of losing something is significantly more intense than the positive impact of gaining something of equivalent value.

Humans are evolutionarily designed to prioritize threats and negative information for survival, leading us to respond more strongly to the possibility of a loss than to a gain.

For example, imagine an employee receives a monthly bonus of €50; he or she will probably see it as a nice little extra.

However, if that same employee's salary is reduced by €50, the emotional reaction will be one of indignation and deep discomfort, much greater than the joy of the bonus, despite being the same monetary amount.

We would rather avoid losing what we have than acquire something new.

Applications: free trials and money-back guarantees

Marketers exploit these biases to reduce purchase friction. A common strategy is to offer free trial periods.

During this time, the potential customer incorporates the product into his or her daily life and begins to feel ownership of it.

At the end of the trial, the decision is no longer to "buy something new," but to "avoid the loss" of a service already owned, which strongly motivates subscription to maintain access.

Similarly, selling services by emphasizing what you avoid losing (such as data security in a cloud service) is often more effective than highlighting what you gain.

Money-back guarantees work on the same logic, eliminating perceived risk and allowing the customer to develop a sense of ownership before the final financial decision.

Summary

The endowment effect makes us value more what we already own. The simple fact of ownership inflates the price we would accept to sell the object.

Loss aversion implies that the pain of losing outweighs the pleasure of gaining. We instinctively prioritize avoiding threats over acquiring new benefits of equivalent value.

Marketing uses free trials to create a sense of ownership. Upon completion, the customer buys to avoid feeling the loss of the service they already consider theirs.