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By Dr. David Edward Marcinko; MBA MEd CMP™
SPONSOR: http://www.CertifiedMedicalPlanner.org
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IKEA EFFECT BIAS
Ikea Effect Bias describes the tendency of people to place a higher value on products they have partially created or assembled themselves. This phenomenon is named after the Swedish furniture retailer Ikea, known for selling furniture in flat-pack kits that customers must assemble at home.
he IKEA effect was identified and named by Michael Norton of Harvard Business School, Daniel Mochon of Yale University and colleague Dan Ariely PhD of Duke University, who published the results of three studies in 2011. They described the IKEA effect as “labor alone can be sufficient to induce greater liking for the fruits of one’s labor: even constructing a standardized bureau, an arduous, solitary task, can lead people to overvalue their (often poorly constructed) creations.”
Example: A prospect is more likely to pursue his/her own financial plan than that one from an informed financial planner, CPA or professional advisor.
2011 study found that subjects were willing to pay 63% more for furniture they had assembled themselves than for equivalent pre-assembled items.
IN FINANCE AND INVESTING
The IKEA effect can contribute to reducing panic selling. Investors typically reduce their stock market exposure after a financial crash which often results in “buy high, sell low” strategy that is detrimental to long-run wealth accumulation.
Ashtiani et al.’s study proposes a nudge utilizing the IKEA effect to counteract this phenomenon: “actively involving investors in the selection process of the risky investments, while restricting their selections in a way that preserves a large degree of diversification.”
DIVERSIFICATION: https://medicalexecutivepost.com/2025/06/17/correlation-diversification-in-finance-and-investments/
COMMENTS APPRECIATED
SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors@outlook.com -OR- http://www.MarcinkoAssociates.com
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Filed under: "Ask-an-Advisor", CMP Program, finance, Glossary Terms, Investing, Marcinko Associates, mental health, Portfolio Management | Tagged: Ariely, Ashtiani, bias, business, CMP, david marcinko, diversification, finance, Ikea Effect, Investing, marketing, MD, mental health, Mochon, norton, psychiatry, psychological biases, psychology |
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