Motivation and emotion/Book/2023/IKEA effect

Overview


James is an office worker who is selling his old apartment to move overseas. When he moved in he purchased IKEA furniture and assembled it himself. He regards it as excellent furniture and prices it highly when he sells it online. Stephanie is looking at second hand furniture and sees James' prices and is shocked at the prices at which James is selling his old furniture. She contacts James and tries to bargain his price down, after all it's only cheap furniture, but James doesn't budge on his price insisting that it's the best furniture there is. Stephanie, confused by James's insistence, decides to look for furniture elsewhere.

Why is there such a difference between James and Stephanie's perception of James' old furniture? What does IKEA, the iconic Swedish maker of flat pack furniture have to do with psychology? Perhaps the better question to ask is, why are things like flat pack furniture so popular? What makes people buy unbuilt furniture when they could as easily buy preassembled bookshelves or bed frames of the same or better quality for the same price?

According to psychology a cognitive bias known as the IKEA effect is responsible (Mochon et al., 2012; Norton et al., 2012). This bias refers to the increased value people place on the things they make, when compared with things of similar value that they did not make. Despite its simple name, the IKEA effect is about more than flat pack furniture. Its existence has effects on the way we work, what we buy and how we get others to work with us. To better understand the IKEA effect this chapter defines the IKEA effect, explores the theories around how the IKEA effect works, and looks at the application and downsides of this effect.

Focus questions:


 * What is the IKEA effect?
 * What makes the IKEA effect happen?
 * How is the IKEA effect applied?
 * What are the downsides of the IKEA effect?

Basic definition
The IKEA effect is a cognitive bias, and refers to the increased value people place in things they make, compared with things of similar value that they did not create. Coined by Norton et al. (2012) as part of behavioural economics research into why people value work (see Dan Airely's Ted Talk for a review), the conceptualisation of the IKEA effect was the culmination of a series of experiments investigating how people valued work, and the role of customisation and usefulness in creation.

Initial findings
Norton et al.'s (2012) research consisted of four experiments using different forms of creation (IKEA furniture, origami) to test various aspects of the IKEA effect. Experiment One Part A, used IKEA boxes to test the existence of the effect separate to customising the item. Experiment One Part B, tested the magnitude of the effect using origami, having participants bid on creations built by skilled origami artists, and then build their own own and bid on their creations. Experiment Two tested the role of completion by having builders build and unbuild their origami creations, and then bid on them against people who had not created the origami. Experiment Three tested the role of incompletion, again using IKEA boxes, but not letting the participants complete the construction of their boxes.

The findings from these experiments revealed first that people valued their creations regardless of whether the item was customisable; second, that people value their creations above and beyond the creations of others, being willing to pay up to 63% more for them (Norton et al., 2012) and third that destruction or incompletion of a object causes the sense of value to diminish (Norton et al., 2012). This experiment, and findings by Mochon et al. (2012), form the basis of the theoretical construction of the IKEA effect. The experiment was retested and maintained by Sarstet et al. (2016) suggesting it has good construct validity. This initial research also made a distinction between hedonic creation (creation for pleasure or enjoyment) and utilitarian creation (creation for a purpose) and found the IKEA effect applied to both.





While flat pack furniture is a good example of the utilitarian side of the IKEA effect, building with LEGO bricks provides an example of hedonic creation (see Figure 2). The creativity, imagination and agency in creating that constructible blocks give, are a major reason why LEGO products have remained so successful for over 50 years. Building things out of LEGO blocks can give a real sense of value. Equally, trying to destroy a person's creation tends to lead to negative effects as people tend to get attached to their creations, and even if you were to then give the person the exact same pieces in exchange, they will probably still prefer to keep their creations.

Further developments
Further research into the IKEA effect has expanded the parameters and the definition. Research by Marsh et al. (2018) and Radtke et al. (2019) found that the IKEA effect occurs in children from age 5 upwards. Marsh et al. (2022) found that the IKEA effect can occur in collaborative settings where co-creation occurs, and demonstrated that the valuing of one's own creation occurs across cultures. The concept has been expanded to include the creation of ideas and procedures (Teihen, 2022; Vuculesu et al., 2020) as well as concrete objects, though excludes the overvaluation of human relationships. Based on this evidence the IKEA effect is: the increased sense of value a group or individual has toward their own created idea or object, over those that they did not create. It is also noted that for this effect to occur, the process of creation must be completed.

 Learning check 

{ Which of the following is *not* a way of the IKEA effect? - Thinking your creation is worth more - Liking the bookshelf you built more than the ones in the store + Thinking someone's work is better than yours - Being attached to an idea your team came up with
 * type=""}

What makes the IKEA effect happen?
There is debate in the literature as to what causes the IKEA effect. The initial research by Norton et al. (2012) suggested the IKEA effect may occur as a result of effort justification and sense of ownership, while Mochon et al. (2012) suggested that the IKEA effect occurs due to the increased feelings of competence from creation that boosts a sense of self. A replication of these initial experiments (Sarstet et al., 2016) found that while feelings of competence occurred, the high value placed in created products had more to do with an enhanced sense of ownership than with any pride in the work, suggesting the underlying reasons for the valuing of the creation are similar to cognitive biases such as loss aversion or the endowment effect. Further research by Marsh et al. (2018) found that overvaluing of creation first emerges at the age of five, and that contrary to previous research the IKEA effect was not impacted by either ownership of the object or the amount of effort invested. Marsh et al.'s (2018) research suggests instead the IKEA effect has more to do with a person's self-concept and viewing creations as extensions of the self, suggesting that similar to the findings of Sarstet et al. (2016) there are links to the endowment effect and social psychological theory around objects as an extension of the self-concept.

Research on overvaluation lacks insight into the influence of socio-cultural effects, and the contrary nature of findings may have more to do with context and learning, than with any unlearnt, innate process of the IKEA effect. Regardless of the exact mechanisms, the literature as a whole consistently finds that the creation and completion of an object by an individual or group changes the perception of the object, and affects a person's self concept.

Emerging research; The IKEA effect in the brain


In addition to the cognitive exploration of overvaluation, recent research has begun to focus on the neurological aspects of the IKEA effect. Foundational research by Oishi et al. (2023) found that the mechanisms of the IKEA effect showed up in the left-middle frontal gyrus and left inferior frontal gyrus areas of the brain. This research also provides evidence of memory and attachment aspects being linked to how the IKEA effect appears in the brain.

Other research has focused on the attachment and threat of loss aspects of the IKEA effect. Research by Liu et al. (2023) found neural activity of the IKEA effect is linked with attachment, overvaluation and the fear of potential loss. The researchers demonstrated this through observing activity in the nucleus accumbens region of the brain, noticing greater activity when the participant was shown their own objects and decreased activity when trying to discard an object to which they had an attachment. This emerging research suggests the IKEA effect may emerge due to multiple neurological processes, though more research is required to confirm and develop these connections.

 Learning check  { The IKEA effect is considered to: -Give a greater sense of value when more effort is applied + Be linked to memory and attachment in the brain -Have no evidence in the brain - Be the culmination several cognitive biases
 * type=""}

Marketing and customisation
Perhaps the most common application of the IKEA effect is how it is used on consumer populations to convince people to buy products and pay more for them. The earliest observations of what would come to be known as the IKEA effect come from marketing research into cake mixes (Shaprio, 2004). When ready-made cake mixes were first introduced during the 1950's they did not sell well, and companies wondered why something that made people's lives much easier didn't sell. It got the point where one of these cake companies ended up consulting a psychologist, and as a result of this consultation, ended up removing the eggs and milk from cake mixes. The logic for this decision came as a result of individuals (mostly housewives) not feeling any sense of ownership or pride in packet-mix cake due to a lack of involvement in the creation of the cake. The removal of these two simple ingredients, and targeted advertising, led to an increase in a sense of personal involvement in the creation of the cake and correspondingly, sales (Shaprio, 2004). This research captures a prime example of one the major applications for the IKEA effect used on people today; the use of involvement of a person in the creation and customisation process to increase value. This application of the IKEA effect shows up everywhere, especially in modern western societies where mass customisation abounds (I-ling et al., 2022). From pure DIY to make it yourself meals, flat pack furniture to toys you make, applications of the IKEA effect show up everywhere and affects our the way we engage with products.

Financial investment
Contrary to its use in marketing, another potential application for the IKEA effect is its use to decrease unwise finical investment (Ashtinai et al., 2021). The research suggests the use of the IKEA effect to push investors against panic selling by having them self-create risky financial portfolios in order to increase a sense of ownership, and decrease the willingness to risk portfolios. Although this research showed early promise in a population of university students, recent research by Brunner et al. (2023) indicated that amongst actual investors the process of financial portfolio self creation did not cause the IKEA effect to occur. This contrary research suggests the need for further research to be done to understand if, and how, the IKEA effect can be applied to financial investment.

Collaboration
Valuing creations has more uses than just commercial gain. The collaborative aspects of the IKEA effect show potential in increasing healthy eating behaviours, by increasing children's involvement in the preparation of food (Radtke et al., 2019). While Raghoebar et al. (2017) found that self-crafting vegetables had not caused any difference in consumption in children, a follow up study by Radtke et al. (2019) found that children's involvement in the preparation of food when collaborating with an adult increased the consumption of healthy foods. This research suggests that a collaborative use of the IKEA effect can be useful to increase health behaviours, however more research is needed, as the overvaluation only occurred in child participants (Radtke et al., 2019). Other potential avenues for the use of collaboration are yet to explored, Google software engineer Matt Rickard suggest that software development experiences the IKEA effect. Online spaces where collaboration is allowed, such as editable wikis, could be argued to be impacted by the IKEA effect as well, especially as user interaction is considered to be such a large part of software development, however research is needed to explore this space and confirm these hypothesis.

In the workplace
Going back to where the research into the IKEA effect began, the IKEA effect also has an application for managing and understanding a sense of value in work. Early research mentioned in Dan Aerily's TED Talk demonstrated there are costs in the loss of a project in the workplace, as the sense of value and attachment is lost if the project is not completed (Norton et al. and Mochon et al., 2012). This suggests that in order to increase wellbeing amongst workers, giving them a sense of completion, even on failed projects, may better promote future productivity for workers. Research also found that the IKEA effect can be used to create better problem solving methods within workplaces (Vuculesu et al., 2020) by getting individuals to create their own problem solving methods rather than relying on external ones.

 Learning check  { The IKEA effect is used to get people to pay more for products? - False + True
 * type=""}

What are the downsides of the IKEA effect?
It also important to understand there is a downside to overvaluation. A heightened sense of value can lead to attachment to an object or idea far past the point where it is viable and/or useful. This downside can be seen across a wide range of spaces in life, but is most costly in the world of business. The decision to over rely on internal solutions, or to stay on projects far after they should have been scrapped, can cost millions (Shumeli et al., 2012; Thomas & Alluru, 2016). The effect has similar consequences to other biases such as groupthink and is important to understand in order to prevent project failure and loss (Thomas & Alluru, 2016). Recent research has also demonstrated a neural link for this behaviour, Liu et al's. (2023) research found that the neural activity caused by overvaluation to be similar to brain activity in those who have a hoarding disorder. This evidence suggests that whilst the IKEA effect has positive applications, there is also a need to control and reduce an individual's attachment to objects and ideas when they become a liability to productivity or functioning.

 In the early days of the computer company Apple, the founder Steve Jobs had created a computer known as Lisa. The first version of this computer was fairly successful, Lisa 2 however was not. Despite major costs and failing sales, Jobs' refused to give up the project, (in part due to the computer being named after his estranged daughter) and had to be forced off, beginning a spiral that led to Job's removal from Apple in 1985.

Though the research into how to counter overvaluation is lacking, research by Mochon et al. (2012) indicates that acknowledging the individual behind the creation can lessen the strength of the IKEA effect. This indicates that in order to mitigate the negative effects of overvaluation, one must instead target the person's identity and feelings of value. This suggests that in order to prevent overvaluation of created objects, the person must feel valued, suggesting the need for people to be praised for more than just their work.

 Learning check  { What is the major downside of the IKEA effect? - A person has to build stuff to the effect - It can cause addiction - Building things is expensive + Overvaluing objects can lead to bad and costly decisions
 * type=""}

Conclusion
This chapter discussed the IKEA effect. The IKEA effect is defined as a cognitive bias that causes groups and individuals to value their own created ideas and objects far above and beyond those created by others, even if they are of equal value. For this effect to occur the creation process must be completed and overvaluation is lost when the valued object is destroyed. The exact reasons why the IKEA effect happens is linked to both cognitive biases and processes in the brain, though more research is required to properly understand and define these. This chapter also demonstrated that there are many applications of the IKEA effect across a range of areas of life, discussed the potential negative effects of overvaluation, and how they can be mediated. Limitations of the current research and theory as well as suggestions for future directions of research are discussed throughout.