Tag: IKEA effect

Ask Ariely: On Tipping, Attachment, and Hoarding

Jun 08

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

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Dear Dan,

I work as a waiter in Waikiki, and sometimes to pass the time I conduct mini-experiments with customers, altering my behavior and attitude from day to day and seeing if it increases tips (in case you were wondering, seeming sad nets the most tips).

I have noticed that those paying with credit cards leave bigger tips, but it varies by card: American Express users tip the most, those with Visas a little less. Discover card users are by far the worst. I can’t quite figure this out.

—V 

One possibility is that wealthier people get American Express cards, the less affluent Visa, and the least well-off Discover—and they tip accordingly. You should be able to test this hypothesis by looking at their spending patterns—for example, how much they spend on wine.

Another possibility is that credit cards have a priming influence. If a person takes out an American Express card and looks at it, its reputation as a premium card might make the owner feel richer and therefore more generous. These feelings would diminish with a Visa card and be present even less with a Discover card (which generally is of more modest repute).

My guess is that both of these hypotheses play a role in what you’ve observed. To be sure, we would need to experiment by having a group of people with multiple kinds of credit cards pay in similar situations using different cards. Then we’d see if and how they change their spending.

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Dear Dan,

I work with many entrepreneurs in their early innovation stage and am always intrigued by the strong (irrational) attachment they develop to their idea, often leading to their being blind to reality and to wasting time and money. How quickly do we get irrationally attached to our ideas? Is it based on elapsed time or on specific actions we take (such as presenting the idea to others)? What can be done to cure this?

—Omer 

The problem, of course, is not just with entrepreneurs. From time to time we all experience someone in a meeting who says something random, and not particularly smart, but then insists that we follow up on his or her brilliant suggestion.

A few years ago, Daniel Mochon, Mike Norton and I conducted experiments about what we called “the IKEA effect”: As the instructions to build something become more challenging and complex, we love even more what we have created. We also showed that this effect takes place rather quickly. In perhaps the most interesting and irrational part of the whole story, we found out that we also mistakenly think other people will share in our excitement over our inferior creations.

What can we do about this? We could try to create an environment where ownership is less powerful or less associated with particular individuals. But if we manage to reduce or eliminate the feeling of ownership, are we also eliminating commitment and motivation? Maybe we should try to increase this sort of proprietary attachment. (And by the way, now that I have finished, I love my answer and think that it is very insightful.)

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Dear Dan,

After I’ve bought an expensive or limited-edition scotch, I worry about drinking the bottle too quickly or being unable to find more once it’s gone. So partly opened bottles in my closet keep accumulating. Any advice on how to enjoy my scotch rather than hoarding it?

—Jonathan 

The problem with hoarding (collecting) is thinking about it as one decision at a time. I would either try to think about such questions from a broader perspective (“Would I be interested in getting 24 more bottles?”) or set up a rule for the number of bottles that you can have in your house at one time (let’s say 10). Then you’d have to finish a bottle or give it away before you acquire another.

See the original article in the Wall Street Journal here.

HBR Breakthrough Ideas for 2009

Feb 05

HBR just came out with their Breakthrough Ideas for 2009.

One of my projects was selected to this list in 2008, and another was selected this year.

Here is the writeup of the project ….

Labor is not just a meaningful experience – it’s also a marketable one. When instant cake mixes were introduced, in the 1950s, housewives were initially resistant: The mixes were too easy, suggesting that their labor was undervalued. When manufacturers changed the recipe to require the addition of an egg, adoption rose dramatically. Ironically, increasing the labor involved – making the task more arduous – led to greater liking.

Our research shows that labor enhances affection for its results. When people construct products themselves, from bookshelves to Build-a-Bears, they come to overvalue their (often poorly made) creations. We call this phenomenon the IKEA effect, in honor of the wildly successful Swedish manufacturer whose products typically arrive with some assembly required.

In one of our studies, we asked people to fold origami and then to bid on their own creations along with other people’s. They were consistently willing to pay more for their own origami. In fact, they were so enamored with their amateurish creations that they valued them as highly as origami made by experts.

We also investigated the limits of the IKEA effect, showing that labor leads to higher valuation only when the labor is fruitful: When participants failed to complete an effortful task, the IKEA effect dissipated. Our research suggests that consumers may be willing to pay a premium for do-it-yourself projects, but there’s an important caveat: Companies hoping to persuade their customers to assume labor costs – for example, by nudging them toward self-service through internet channels – should be careful to create tasks difficult enough to lead to higher valuation but not so difficult that customers can’t complete them.

Finally, the IKEA effect has broader implications for organizational dynamics: It contributes to the sunk cost effect, whereby managers continue to devote resources to (sometimes failing) projects in which they have invested their labor, and to the not-invented-here syndrome, whereby they discount good ideas developed elsewhere in favor of their (sometimes inferior) internally developed ideas. Managers should keep in mind that the ideas they have come to love, because they invested their own labor in them, may not be as highly valued by their coworkers – or their customers.

   

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