Does investing our own (fruitful) labor into a cultural artifact's creation cause us to overvalue said artifact, as these business-school-types argue? Or is it rather that the investment of a fresh egg or a few turns of an allen wrench counteracts a tendency to undervalue—and underappreciate—the labor of others?

re: business, diy, food and drink, furniture, ikea, work

Nate:

When instant cake mixes were introduced, in the 1950s, housewives were initially resistant: The mixes were too easy, suggesting that their labor was undervalued. When manufacturers changed the recipe to require the addition of an egg, adoption rose dramatically. Ironically, increasing the labor involved – making the task more arduous – led to greater liking….

When people construct products themselves, from bookshelves to Build-a-Bears, they come to overvalue their (often poorly made) creations. We call this phenomenon the IKEA effect, in honor of the wildly successful Swedish manufacturer whose products typically arrive with some assembly required.

In one of our studies we asked people to fold origami and then to bid on their own creations along with other people’s. They were consistently willing to pay more for their own origami. In fact, they were so enamored of their amateurish creations that they valued them as highly as origami made by experts.

We also investigated the limits of the IKEA effect, showing that labor leads to higher valuation only when the labor is fruitful…