October 13, 2011

The IKEA effect

In his new book “The Upside of Irrationality” Dan Ariely writes about a type of behavior, which he labels as “The IKEA Effect”. He states, “[...] experiments taught us that we become attached to things that we invest effort in creating, and, once that happens, we start to overvaluing these objects.” The writer indicates that one of the reasons for the success of IKEA is this attachment.

While the businessmen grow their businesses, they may need to invest a lot of time and to work hard for years. Even if they may not perform physical work, their emotional investment is very high. The end product is their company. Many businessmen consider their companies as their children. Of course, when it comes to evaluating their companies, they cannot be as unbiased as a third person.

Consequently, it becomes very hard to reach an agreement when there is only one potential prospect, interested in purchasing the company shares. To avoid facing such a situation, which considerably lowers the possibility of the sales of shares, we create competition during the process and show our clients the way of obtaining a value above their expectations.

Dan Ariely quotes an Arabic saying:”Even the monkey, in his mother’s eyes, is an antelope.” :-)

You can click here to get more information on Dan Ariely.

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