Latest / Behavioral Economics with Fexingo: Decision Making, Bias, and How People Really Spend / Why You Spend More When You Touch the Product
Transcript
- Lucas: You walk into a store, pick up a sweater, feel the fabric between your fingers, and suddenly it's yours. You didn't plan to buy it, but now you're at the register. What just happened? Luna: I think we've all been there. But is it really that simple? Just touching something makes you want to own it? Lucas: It's not just wanting. It's a measurable bias called the endowment effect. Once you touch a product, your brain treats it as if you already own it. And once you feel ownership, letting go feels like a loss. So you pay more to keep it. Luna: That's fascinating. And there's a classic study on this, right? The coffee mug experiment? Lucas: Exactly. In 2008, researchers at the University of Chicago gave half the students a coffee mug and asked them to name their selling price. The other half, who never held the mug, were asked how much they'd pay. The mug owners demanded around $5.25 on average. The buyers were only willing to pay about $2.50. Just holding it for a few seconds doubled the perceived value. Luna: So it's not just about touch, but about the sense of ownership that touch triggers. That's a powerful insight for retailers. Lucas: And you know, if this kind of insight has ever made you think differently about your own spending, that's exactly why we do this show. We keep it ad-free and focused on the research. If walking through the economy with us has made something click, you can support us at buy me a coffee dot com slash fexingo. It's a small way to keep these episodes coming. Luna: Yeah, and honestly, even a coffee's worth makes a difference. It helps us keep digging into studies like this one. Lucas: So back to that mug. The endowment effect isn't just a lab curiosity. Retailers have known about it for decades. Think about car dealerships — they practically force you to take a test drive. They hand you the keys, you sit in the driver's seat, adjust the mirrors, feel the steering wheel. Within five minutes, that car feels like yours. And your willingness to pay jumps. Luna: And mattress stores are the same. They encourage you to lie down on the bed, sometimes for ten minutes. Once you're comfortable, the price seems reasonable because you've already 'owned' that comfort. Lucas: Exactly. But here's where it gets interesting: the effect isn't limited to physical stores. Online retailers are trying to replicate it. That's why you see augmented reality features — like IKEA's app that lets you place a virtual sofa in your living room. Or Warby Parker's home try-on program. They're trying to create that sense of ownership before you buy. Luna: So the psychology is the same even in digital environments. If you can simulate touch or placement, you trigger the endowment effect. Lucas: Right. And the neuroscience backs this up. When you touch an object, your somatosensory cortex activates, and that's linked to the medial prefrontal cortex, which processes value and ownership. So your brain literally treats the touched object as more valuable. Luna: Is there a way to protect yourself from this bias? I mean, if I know I'm going to a store, can I prepare? Lucas: One strategy is to impose a mental rule: if you pick something up, put it back and walk away for at least ten minutes. That breaks the ownership spell. Another is to ask yourself, 'Would I buy this if I hadn't touched it?' If the answer is no, you're probably falling for the effect. Luna: That's good advice. But I wonder, does the effect work for all products equally? Or are some items more susceptible? Lucas: Great question. Research suggests the effect is stronger for products that are more hedonic — things that give pleasure, like luxury goods, comfortable clothing, or electronics. For utilitarian items, like a pack of printer paper, touch doesn't add as much value. You already know what it's worth. Luna: So touching a cashmere sweater is dangerous, but touching a paper towel roll is safe. Lucas: Exactly. And retailers know this. That's why high-end stores encourage you to touch everything. Apple stores are a prime example — they have all their devices out, fully charged, with inviting surfaces. You pick up an iPhone, swipe through the interface, and suddenly it feels like yours. The average Apple store customer spends over 20 minutes handling products before buying. Luna: And Apple's profit margins are enormous. So clearly that strategy works. Lucas: It does. But there's also a darker side. Some retailers use the endowment effect to push you into purchases you might regret. Think of 'free trials' — you get the product for 30 days, you set it up, use it, get used to it. After 30 days, you have to pay or return it. Most people pay, even if they wouldn't have bought it upfront. Luna: So the free trial is essentially a touch-based ownership trigger, but extended over time. Lucas: Exactly. And it's not just physical products. Software companies do this with premium features. They give you full access for a month, then take it away. The loss of the feature feels worse than the cost of subscribing. Luna: That's a classic loss aversion play, but it's amplified by the endowment effect. Lucas: Right. So what's the takeaway? When you're shopping, be aware of the moment you touch something. That's the moment your brain starts shifting its valuation. And if you're a retailer, the lesson is clear: get your product into the customer's hands as early as possible. Luna: Or, if you're an online retailer, find a way to simulate that touch. Lucas: Exactly. And that's where technology is heading. I've seen startups using haptic feedback gloves for virtual shopping. Imagine feeling the texture of a fabric through your screen. That could trigger the endowment effect even more strongly. Luna: That's incredible. But also a little scary. It means our biases are being targeted in ever more sophisticated ways. Lucas: It's a reminder that awareness is your best defense. The more you understand these mechanisms, the more control you have over your spending decisions. Luna: So next time I'm in a store and I pick something up, I'll take a beat. Maybe put it down and walk around the block. Lucas: That's a solid plan. And if you do end up buying it, at least now you'll know why.