The “Endowment Effect” and Why Finishing Feels Harder Than Starting

Word Count: 1,455 Estimated Read Time: 6 Min.

You’ve started a project and made significant progress on it.  It’s time to wrap up.  By all accounts, it’s basically done.  But somehow, you just can’t seem to finish and let it go.  You continue to tinker with it.  You feel you are making it even better and are very proud of that.  You’re reluctant to release it to either the next stage or to world.  It’s not that it’s not good enough.  It’s great and yet you are reluctant to push it over the finish line.  You are experiencing the Endowment Effect.

The Endowment Effect is a cognitive bias where people tend to value items that they own, possess or develop more highly than they would if it did not belong to them or they had no part in its creation.  An owner or maker is unwilling or unable to see an item’s actual value or factor in the appropriate depreciation.  This happens with most things we “own.”

The Invisible Grip of the Endowment Effect

The Endowment Effect has a big impact on people as both buyers and sellers of goods.  On the one hand, for makers and sellers, this bias can be easily exploited.  Marketers and salespeople use any tactic that makes a person feel a sense of psychological ownership over a product or service to encourage the buyer to spend more on it or keep it.  On the other hand, as sellers, the Endowment Effect can lead the seller to price things unreasonably based on a misguided sense of value.

The Endowment Effect accounts for at least some of the irrational decisions people make during economic interactions. That’s because marketers constantly exploit the Endowment Effect to influence our buying behavior. Marketers know that people are easily swayed by tactics that make them feel a sense of ownership over products, encouraging them to shell out more money for items than they would if they felt no personal connection to them.  For example, homebuilders and apartment building owners will often create “furnished models” of the homes or units available for sale or rent.  Decorations will include themed rooms that are sure to resonate with the largest number of buyers/tenants, such as nature, birds, fishing, super heroes, princesses, well-known movies or books, and even cherished cartoons and toys.  Decorators will create a ‘Toy Story-themed’ kids room or a ‘Gone Fishing-themed’ Study for dad.  Just seeing a room decorated with a beloved theme is often enough to make the buyer/tenant feel connected and invested, leading them to choose that model.

Similarly, to leverage the Endowment Effect, many companies offer free trials. Free trials give customers a sense of virtual ownership, or the feeling that they already own a product before they do, which can make them feel emotionally attached to a product before they decide to buy it.  They end up wanting to keep the product after the trial period is up—and often pay good money to do so. That is also why customers often choose to continue a subscription, despite promising themselves that they would only use the free trial and cancel before being charged. And it explains why they might keep subscriptions long after they’ve stopped using the product or service. They develop a sense of ownership over a subscription once they’ve had it a while, causing them to overvalue it—even if they’re getting less or no value out of it now.

The 1998 study by Michal A. Strahilevitz and George Loewenstein on the Endowment Effect, published in the Journal of Consumer Research, found that an object’s value increases with the duration of ownership, a concept they called the “length-of-ownership effect“. They demonstrated that psychological ownership grows over time, increasing the owner’s valuation of the item, even for inanimate objects like personal belongings.  That is why a person may be willing to pay a lot of money for an old toy once owned when encountering it again years later on eBay. Overall, a sense of ownership helps us justify paying a higher price for something than they would if they were viewing it with an objective eye.

Finding a thing even more valuable the longer it’s owned is ironic since most things tend to depreciate over time.  But it also gets increasingly difficult to find people to buy older items for a price the seller would be willing to accept. As a result, the seller often resists parting with the things they own, even when it makes more financial sense to sell it.

This happens a lot with real estate.  Homeowners want to set the sales price of their home higher than recent sales prices of comparable properties in the area.  It is only after the home is listed for sale and sits on the market for weeks or months without any offers, or after rejecting lower offers that were in line with market comps, that a seller will agree to drop the price.  And building owners will often price a building that they renovated and improved much higher than what the market bears for similar buildings in the area at that point in time. 

All of this has important financial consequences. The Endowment Effect can cause people to overspend when they are buying things, leading to extra costs that add up over time.  Meanwhile, this bias can lead to opportunity costs if it causes people to overprice things to the point where they are unable to sell it.

The Endowment Effect on Work Product

So how does the Endowment Effect impact systems and workflow?  It causes people to be increasingly possessive of work they created and resist letting go of a project or declaring it “done.”  It makes finishing a project feel harder than starting it. This can negatively impact project management by causing resistance to change, overvaluation of existing plans or resources, and difficulty in project completion, as team members may irrationally cling to their own work.

It manifests in other ways as well.  Employees can become reluctant to make changes. Team members may become overly attached to their existing part of the project, making them resistant to necessary modifications, such as scope adjustments, technology swaps, or even replacing a team member.  Or a project manager or team member may irrationally overvalue an initial idea or an approach they developed, even when objective data suggests a better alternative exists.

It can also make it difficult for team members to cut their losses.  In a project with failed or underperforming elements, the Endowment Effect can make it difficult for the team to abandon that work and pivot, as they are emotionally attached to the effort already invested.  And, if the project involves selling or handing off a product, the Endowment Effect can lead to unrealistic expectations for the final value, causing delays or failure to close the deal. 

Countering the Endowment Effect at Work

While the Endowment Effect happens often and is “natural,” it is not ideal for productivity.  The good news is that there are ways to counter the negative impacts of the Endowment Effect.  The key to mitigating it in a project environment is often to de-couple emotional ownership from professional decision-making.

• Introduce the endowed progress effect.  To increase motivation and completion rates, frame tasks as already having some progress made. For example, a task requiring 10 steps can be presented as a 12-step task with the first two steps already complete.  That means “ownership” is shared with others.
  
  
• Use neutral third parties.  A mediator or outside consultant can provide more objective advice and facilitate decisions that the core team, burdened by emotional attachment, might find difficult to make.
  
  
• Focus on objective data.  Encourage decisions to be based on objective performance data and market value rather than emotional attachment to a particular approach or deliverable.
  
  
• Introduce experience with alternatives.  Teams or individuals with more experience in buying and selling or in dynamic markets are less susceptible to the Endowment Effect, as they have a more realistic view of what a product is worth to others. 

Recognizing the impact of the Endowment Effect and talking about ways to mitigate its effect on a project environment by de-coupling emotional ownership from professional decision-making is easy to say but much harder to do.  However, many companies have done just that, including some of the largest, most complex global companies in the world.  Google, Amazon and General Electric have all tackled the impact of the Endowment Effect on their massive workforces effectively (even while they leverage this bias in their own favor when selling products and services).  Next week, we’ll dive into the deep end and examine how these major powerhouse organizations tackled a productivity-killing bias that occurs inside the brains of their vast organizations.  Stay tuned!  It will be worth the read.

Quote of the Week
“Change is hard because people overestimate the value of what they have and underestimate the value of what they may gain by giving that up.”
James Belasco

© 2025, Keren Peters-Atkinson. All rights reserved.