The IKEA Effect 101

Quick update before we start - I’m running a short survey to determine the focus of this newsletter going forward, please share your thoughts here -

Now, onto The IKEA Effect -

The IKEA Effect is a fascinating cognitive bias that helps explain why we tend to value things more when we've invested our own effort into creating them.

It's a powerful psychological principle with implications for everything from marketing to personal relationships.

Origin of the Term

The name comes from a 2011 study by Michael Norton, Daniel Mochon, and Dan Ariely. They observed that people place disproportionately high value on products they assembled themselves (like IKEA furniture), compared to identical pre-assembled products.

How the IKEA Effect Works

When we put effort into creating or assembling something:

1. Labor = Love: The effort we invest creates an emotional connection to the final product.

2. Psychological Ownership: Even if we didn't design the item, the act of assembly makes it feel more uniquely "ours."

3. Competence Signaling: Successfully completing a project provides a sense of achievement and reinforces our self-image as competent individuals.

4. Customization Effect: Even minor input or customization significantly increases perceived value.

5. Endowment Effect Amplification: We already value things more once we own them (the endowment effect), and our labor intensifies this feeling.

Everyday Examples

The IKEA Effect appears in numerous contexts beyond furniture assembly:

• Cooking: Home-cooked meals often taste better to the cook than to others.

• DIY Projects: People frequently overvalue their own home renovations compared to professional work.

• Workplace: Employees feel more committed to ideas they helped develop.

• Digital Products: User-customized interfaces generate stronger loyalty.

• Relationships: Investments of time and effort strengthen our attachment to people and communities.

How to Overcome the IKEA Effect?

• Recognize when you might be overvaluing something simply because you made it

• Leverage the effect by intentionally engaging in creative activities for greater satisfaction

• Balance the joy of DIY with an honest assessment of when professional help makes more sense

It’s easier said than done, that’s why you should use AI to overcome it -

Using AI to Overcome the IKEA Effect

AI can help counterbalance this cognitive bias through:

• Objective Evaluation

• Value Estimation

• Sunk Cost Analysis

• Decision Support

• Constructive Feedback

You can simply ask an AI to help you deal with the IKEA effect, or you can use one of the prompts I’ve created based on your situation. All prompts on this page -

• The IKEA Effect Prompts

This page has the following prompts -

• Basic “catch all” prompt

• Advance prompt

• Creative projects prompt

• Business decisions prompt

• Home/DIY projects prompt

This page also has some basic tips to use these prompts well.

Do let me know what you think of the IKEA effect and the set of prompts I shared, and would you like us to cover more such topics in this newsletter.

That’s it for today.

See you next week 👋

Cheers,

Ayush & Aditi