Think Design: The Endowment Effect

Close your eyes, and… No, wait! Don’t close your eyes, or you won’t be able to read this post.

Okay, keep your eyes open, definitely keep your eyes open. Now imagine your home. Imagine walking through it, from room to room. See your belongings exactly as you have them. Your furniture, artwork, electronics, clothes, everything. Now think of something you own that is valuable to you. Got something in mind? Great. How much would you sell it for? If it’s something really valuable to you, maybe you wouldn’t sell it for any price. Maybe you feel it has sentimental value. Part of what creates this sentimental value is the Endowment Effect.

The endowment effect says that we value things more when we own them. This is why home sellers often think that realtors and buyers are undervaluing their house. It’s also why we sometimes have a hard time lending books, movies, or games to friends. Because once we own something, it’s no longer a house or a game, it’s our house or my game.

I’m not sure if I want you borrowing my car – it’s a classic.

Interestingly, the endowment effect can begin even before we own something. If we get very close to owning something, we already start treating it as though we own it, and mentally increase its value just as we’ll do once we officially own it. For example, let’s say that you are buying a house, and you find one you really like. It’s been on the market for a while, and no one else has been by to see it recently. After thinking about it for a few days, and picturing yourself living there, you decide to go for it. You can afford a mortgage of $450,000, but you decide the most you will pay is $420,000. Of course you want to get the cheapest price you can, so you put in an offer of $400,000 to start – after all, they haven’t had any recent viewings, so they’re probably desperate (clearly, this example isn’t taking place in Vancouver). Unfortunately, your realtor calls with some bad news: someone else has put in a better offer. Your realtor suggests you increase your offer to $430,000. What do you do?

If you are like most people, you will agree to offer $430,000, even though you decided to go no higher than $420,000. You will find different ways to justify it – it’s only $10,000 more than you planned, which really isn’t much as a percentage of the total; the home will go up in value anyway, so it will be worth it even at the higher price; $420,000 wasn’t really your maximum, you were just being overly cautious.

I paid more than I planned, but I’m sure it will work out.

The reason we are willing to pay more than we initially planned is because of the endowment effect. You were already picturing yourself in that house, so it felt like it already belonged to you, and you don’t want to let it slip between your fingers.

In essence, the endowment effect says that we cling to things we own (or almost own) and so we over-value them.

So how can we use the endowment effect in our game design?

In almost every Metroid game, the player starts off with a bunch of powerful weapons, gadgets, and armor. After a short intro sequence, all of it is stripped away, and the player is left in a weakened state. Most of the game involves finding the missing weapons and armor to rebuild the character’s original strength and take on the game’s final boss. Starting the player with a bunch of powerful weapons and armor lets the player experience the value of them. Losing the items therefore creates a big sense of loss that motivates the player to get the items back. This concept has sometimes been referred to by the great term abilitease.

Hmmm, where did I put that Power Suit?

League of Legends employs a similar tactic. In that game, the player chooses a character, called a Champion, to take into battle. Each champion has a unique appearance and different abilities, so players can find one that best suits their own personal style.

The game currently features over 115 champions, with new ones added all the time, so there’s plenty of choice. But here’s the catch: during any given week, only ten of these champions are available for free. At the end of each week, the free champions swap out, and a new batch becomes available. Want to play as a champion that isn’t in the free lineup? You need to buy it – then you can use it any time. Unless the player buys her favorite champion, she has to wait until that champion rotates into the free lineup again (which can take a long time with all those champions).

Don’t worry, this champion will be free in another 3 months or so.

Letting players try champions for free is a great way to encourage experimentation, but it also taps into the endowment effect. When a player finds a champion she likes, it will be very painful to give up that champion at the end of the week. The champion will be valuable in the player’s eyes, making it far more likely that she’ll pay to keep that champion.

WARNING – MINOR SPOILERS! The following paragraph contains minor spoilers about the first twenty minutes of The Last Of Us.

One of the most brilliant uses of the endowment effect in a recent game was in the opening sequence of The Last Of Us. The player begins the game by controlling Sarah, the twelve year-old daughter of the game’s main character, Joel. After spending some time walking around the family’s suburban house, Sarah must flee with her dad as the town suddenly becomes overrun by a deadly virus. Following a harrowing escape sequence in the middle of the night, the two make it out of town to the safety of a nearby forest, where they encounter a military squad that has arrived to contain the situation. In the darkness, the military can’t tell whether Joel and Sarah are infected, and begin barking out orders that Joel and Sarah can’t understand. In the confusion, Sarah is gunned down, and dies. The game continues some 20 years later, with the player taking control of Joel, Sarah’s father. In this case, the endowment effect was used brilliantly. By starting the game as Sarah, the player takes ownership over her protection. When she dies, the player feels as though he has lost something valuable. Now, as Joel, the player can sympathize far more deeply with Joel’s own feelings of loss. The approach creates a powerful emotional impact, thanks in part to the endowment effect.

This part of the game really isn’t as creepy as it looks.

SPOILERS OVER! If you skipped, you can start reading again here.

Another place we see the endowment effect in games is in auction houses, where players can sell in-game items to other players. When bidding on a particular item is fierce, the ‘almost mine’ effect takes hold, often making players bid far more than they planned. This drives up bids from competing players, so popular items frequently sell for far more than the asking price.

Do you guys have any Kingsblood in stock? I’m looking for the Robb Stark brand.

One last design use worth mentioning is in collectibles. Utilizing what is sometimes called the endowed progress effect, collectibles effectively tap into the endowment effect. Once we have a few of something, we attribute more value to those objects, making us want to complete the entire collection (completion is another compulsion that frequently guides our behavior, putting progress bars and checklists into this category as well). This is why many games give the player the first item in a collection very easily – it creates a desire for the player to complete the collection by continuing to play the game. Ever wonder why so many free to play games have collection mechanics? Now you know.

From the runways of FarmVille, the all-new Fall Egg Collection.

That’s the endowment effect in a nutshell. You can use it to get players more invested in your game, spend more at auction houses, or search every nook and cranny for that last collectible. Keep it in mind the next time you’re thinking of overpaying for something just because you’ve already taken mental ownership of it. And feel free to throw out that unwearable pair of jeans that were soooo comfy back in grade eight – they’re really just jeans.

Ryan Donaldson teaches Business of Games at VFS Game Design