The Irrational Bundle. Dan Ariely

first quirk, as we saw in the case of the basketball tickets, is that we fall in love with what we already have. Suppose you decide to sell your old VW bus. What do you start doing? Even before you’ve put a FOR SALE sign in the window, you begin to recall trips you took. You were much younger, of course; the kids hadn’t sprouted into teenagers. A warm glow of remembrance washes over you and the car. This applies not only to VW buses, of course, but to everything else. And it can happen fast.

      For instance, two of my friends adopted a child from China and told me this remarkable story. They went to China with 12 other couples. When they reached the orphanage, the director took each of the couples separately into a room and presented them with a daughter. When the couples reconvened the following morning, they all commented on the director’s wisdom: Somehow she knew exactly which little girl to give to each couple. The matches were perfect. My friends felt the same way, but they also realized that the matches had been random. What made each match seem perfect was not the Chinese woman’s talent, but nature’s ability to make us instantly attached to what we have.

      The second quirk is that we focus on what we may lose, rather than what we may gain. When we price our beloved VW, therefore, we think more about what we will lose (the use of the bus) than what we will gain (money to buy something else). Likewise, the ticket holder focuses on losing the basketball experience, rather than imagining the enjoyment of obtaining money or on what can be purchased with it. Our aversion to loss is a strong emotion, and as I will explain later in the book, one that sometimes causes us to make bad decisions. Do you wonder why we often refuse to sell some of our cherished clutter, and if somebody offers to buy it, we attach an exorbitant price tag to it? As soon as we begin thinking about giving up our valued possessions, we are already mourning the loss.

      The third quirk is that we assume other people will see the transaction from the same perspective as we do. We somehow expect the buyer of our VW to share our feelings, emotions, and memories. Or we expect the buyer of our house to appreciate how the sunlight filters through the kitchen windows. Unfortunately, the buyer of the VW is more likely to notice the puff of smoke that is emitted as you shift from first into second; and the buyer of your house is more likely to notice the strip of black mold in the corner. It is just difficult for us to imagine that the person on the other side of the transaction, buyer or seller, is not seeing the world as we see it.

      OWNERSHIP ALSO HAS what I’d call “peculiarities.” For one, the more work you put into something, the more ownership you begin to feel for it. Think about the last time you assembled some furniture. Figuring out which piece goes where and which screw fits into which hole boosts the feeling of ownership.

      In fact, I can say with a fair amount of certainty that pride of ownership is inversely proportional to the ease with which one assembles the furniture; wires the high-definition

      television to the surround-sound system; installs software; or gets the baby into the bath, dried, powdered, diapered, and tucked away in the crib. My friend and colleague Mike Norton (a professor at Harvard) and I have a term for this phenomenon: the “Ikea effect.”

      Another peculiarity is that we can begin to feel ownership even before we own something. Think about the last time you entered an online auction. Suppose you make your first bid on Monday morning, for a wristwatch, and at this point you are the highest bidder. That night you log on, and you’re still the top dog. Ditto for the next night. You start thinking about that elegant watch. You imagine it on your wrist; you imagine the compliments you’ll get. And then you go online again one hour before the end of the auction. Some dog has topped your bid! Someone else will take your watch! So you increase your bid beyond what you had originally planned.

      Is the feeling of partial ownership causing the upward spiral we often see in online auctions? Is it the case that the longer an auction continues, the greater grip virtual ownership will have on the various bidders and the more money they will spend? A few years ago, James Heyman, Yesim Orhun (a professor at the University of Chicago), and I set up an experiment to explore how the duration of an auction gradually affects the auction’s participants and encourages them to bid to the bitter end. As we suspected, the participants who were the highest bidders, for the longest periods of time, ended up with the strongest feelings of virtual ownership. Of course, they were in a vulnerable position: once they thought of themselves as owners, they were compelled to prevent losing their position by bidding higher and higher.

      “Virtual ownership,” of course, is one mainspring of the advertising industry. We see a happy couple driving down the California coastline in a BMW convertible, and we imagine ourselves there. We get a catalog of hiking clothing from Patagonia, see a polyester fleece pullover, and—poof—we start thinking of it as ours. The trap is set, and we willingly walk in. We become partial owners even before we own anything.

      There’s another way that we can get drawn into ownership. Often, companies will have “trial” promotions. If we have a basic cable television package, for instance, we are lured into a “digital gold package” by a special “trial” rate (only $59 a month instead of the usual $89). After all, we tell ourselves, we can always go back to basic cable or downgrade to the “silver package.”

      But once we try the gold package, of course, we claim ownership of it. Will we really have the strength to downgrade back to basic or even to “digital silver”? Doubtful. At the onset, we may think that we can easily return to the basic service, but once we are comfortable with the digital picture, we begin to incorporate our ownership of it into our view of the world and ourselves, and quickly rationalize away the additional price. More than that, our aversion to loss—the loss of that nice crisp “gold package” picture and the extra channels—is too much for us to bear. In other words, before we make the switch we may not be certain that the cost of the digital gold package is worth the full price; but once we have it, the emotions of ownership come welling up, to tell us that the loss of “digital gold” is more painful than spending a few more dollars a month. We may think we can turn back, but that is actually much harder than we expected.

      Another example of the same hook is the “30-day money-back guarantee.” If we are not sure whether or not we should get a new sofa, the guarantee of being able to change our mind later may push us over the hump so that we end up getting it. We fail to appreciate how our perspective will shift once we have it at home, and how we will start viewing the sofa—as ours—and consequently start viewing returning it as a loss. We might think we are taking it home only to try it out for a few days, but in fact we are becoming owners of it and are unaware of the emotions the sofa can ignite in us.

      OWNERSHIP IS NOT limited to material things. It can also apply to points of view. Once we take ownership of an idea—whether it’s about politics or sports—what do we do? We love it perhaps more than we should. We prize it more than it is worth. And most frequently, we have trouble letting go of it because we can’t stand the idea of its loss. What are we left with then? An ideology—rigid and unyielding.

      THERE IS NO known cure for the ills of ownership. As Adam Smith said, it is woven into our lives. But being aware of it might help. Everywhere around us we see the temptation to improve the quality of our lives by buying a larger home, a second car, a new dishwasher, a lawn mower, and so on. But, once we change our possessions we have a very hard time going back down. As I noted earlier, ownership simply changes our perspective. Suddenly, moving backward to our pre-ownership state is a loss, one that we cannot abide. And so, while moving up in life, we indulge ourselves with the fantasy that we can always ratchet ourselves back if need be; but in reality, we can’t. Downgrading to a smaller home, for instance, is experienced as a loss, it is psychologically painful, and we are willing to make all kinds of sacrifices in order to avoid such losses—even if, in this case, the monthly mortgage sinks our ship.

      My own approach is to try to view all transactions (particularly large ones) as if I were a nonowner, putting some distance between myself and the item of interest. In this attempt, I’m not certain if I have achieved the uninterest in material things that is espoused by the Hindu sannyasi, but at least I try to be as Zen as I can about it.

      Reflections on the Challenges of Ownership

      In 2007 and 2008, home values across America plummeted as fast as George