What is... | December 2, 2014

What is the IKEA effect?

It's when you build something and adore it — and it applies well beyond the scope of Swedish furniture.

You’ve made a gingerbread house, successfully decorated the roof with pretty tiles of icing, a garden of jelly sweets and marshmallow snowmen. As you sit back to view the finished product, you think “the walls are a bit wonky but it’s as nice as I could buy in a store – I made it myself, after all”. You don’t even mind that it took a whole afternoon to complete. The hours of preparation and the time spent rolling out the walls and roof make enjoying the finished product even more satisfying. 

It's all because of the IKEA effect.

New table? Let’s go to IKEA
Behavioural economics professor and author Dan Ariely popularised the term after wondering why people seem to end up loving products that require assembly. As Ariely explains in a video, the actual assembly is not always stress-free but there is a tendency for the finished product to be much loved by the owner partly because of the role they had in putting it together. “Once you build something, you over attribute value.”

The effect is named after the Swedish home furnishing store IKEA that is famous for selling flat packed tables, drawers and beds that shoppers assemble themselves at home and it can come into play for a room you have painted yourself, a garden you’ve weeded and planted by hand or a card for a loved one designed through your own creativity.

Have you seen the photo of my cake on Facebook?
Feeling satisfaction with building our own gingerbread house or IKEA table might not come as a surprise. But there is a twist. In a 2011 study, Ariely and others found people don’t only enjoy what we have made ourselves – we expect family and friends to treasure the products as well. So if your Facebook stream is full of photos of “do-it-yourself” projects, you know why.

It’s mine, so it’s worth it
This affection for things we have made ourselves is part of a wider thinking trap that comes into effect when people simply own something (without actually having made it). Known as the endowment effect, it can be trouble if it skews financial decisions.
An example is thinking a house you own is worth more than it is – and being reluctant to sell simply because the market won’t meet the inflated price expectation.

A warning for sellers
There is a lot that is positive about the IKEA effect. Do-it-yourself is often cheaper – even once the opportunity cost of assembly time is taken into account. However, on occasion it can pay to keep in mind that not everyone sees the same value in our creations as we do. 

Taking time and energy to build a new shelving unit in your sitting room yourself can be fulfilling but if you’re planning to sell, beware. New buyers may see a slightly wonky addition to the home rather than a beautiful asset that is worth paying extra for. Like countering the wider endowment effect – getting a more objective view can be key.

An off shoot of the IKEA effect is the type of “not made here” silo thinking that can limit productivity and the spread of new ideas in the workplace. Being aware of the danger is a good first step – then put measures in place to counter it.

BehaviourDan ariely

eZonomics team
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