IKEA Effect And The Behavioral Science of Labour And Love

Two weeks ago, I met a lady (Catherine) working on a handmade version of a craft I once saw on Jiji.ng (African online marketplace). I liked what she was working on and offered to buy it from her, but she priced it 6x more than the ready-made version on the marketplace, Jiji.ng. I found it intriguing that Catherine would charge me 6x for a craft she knew I could order for cheap online.?

I dug into some research work that discussed the relationship between labour and love. Do people love what they have laboured on so much that they value it more than an outsider would? What’s the connection between value, liking and mental investment? In this article, I will attempt to answer those questions and discuss hypotheses and experimental results that explore the behavioural science of labour and love.

IKEA and the Origin story

IKEA is a 79-year-old Swedish-founded, Dutch-headquartered multinational conglomerate that designs and sells ready-to-assemble furniture, kitchen appliances and home accessories, among other goods and home services.

The concept is simple—when you put in the work and see something to completion, you fall in love with it. The IKEA effect was coined by three Harvard psychologists: Michael Norton, Daniel Mochon, and Dan Ariely, in the introduction to their 2012 paper “The IKEA effect: When labour leads to love.?

IKEA Effect: the Experiment

This research work published in the Journal of Consumer Psychology by Michael Norton, Daniel Mochon, and Dan Ariely discussed a couple of experiments that proved the IKEA effect and explored its limitations.?

In a series of studies, consumers were made to assemble IKEA boxes, fold origami, and build sets of Legos. The researchers demonstrated and investigated the boundary conditions for the “IKEA effect” – the increase in the valuation of self-made products.?

The researcher’s account suggests that labour leads to increased valuation only when labour successfully completes tasks or achieves a goal. Thus when participants built and then destroyed their creations or failed to complete them, the IKEA effect dissipated. Finally, the researchers showed that labour increases the valuation of completed products not just for consumers who profess an interest in “do-it-yourself” projects but even for those who are relatively uninterested.

Experiments Overview

In the following studies, the researchers demonstrated the IKEA effect by encouraging consumers to exert effort in producing three different products: building IKEA boxes, folding origami and constructing sets of Legos.

Experiment 1A demonstrates the primary effect, showing that participants who assemble utilitarian products value them more highly than identical pre-assembled products.?

In Experiment 1B, the researchers replicated the effect with more hedonic products (an origami), and compared participants’ estimates of the value of their origami creations to others’ estimates of their value, to benchmark the increased value consumers lend to their self-made creations.?

In Experiment 2, the researchers differentiated the IKEA effect from other phenomena known to increase the valuation of products, including the endowment effect and the impact of mere touch on valuation.?

In Experiments 2 and 3, the researchers showed that unsuccessful labour — either by assembling and then disassembling a product or failing to complete the assembly process — does not increase valuation.

Finally, Experiment 3 demonstrated that value from assembling products oneself accrues equally to both consumers who profess to be “do-it-yourselfers” and those who do not, suggesting that the link between successful labour and valuation occurs regardless of one’s intrinsic inclination to engage in labour.

Experiment 1a - Method Summary

Fifty-two (52) people from the Southeastern United States were randomly selected and paid $5 to participate in this experiment. They were divided into teams of builders and non-builders.?

The builder’s team were each given unassembled boxes with the assembly instructions included with the product. In contrast, the non-builders team were given fully assembled boxes and were allowed just to inspect them.

At the end of the session, both teams were made to bid on each box they had either built or inspected. The researchers also told the participants that they knew the actual price of each box, and if any of the participants bid higher than the box’s actual worth, they would have to pay and take the box home. Otherwise, the participants would not have to pay. This technique is a variant of the BeckerDeGroot-Marschak (1964) procedure—an incentive-compatible value discovery method.?

Experiment 1a - Result

Builders bid significantly more for their boxes (M = $0.78, SD = 0.63) than non-builders did (M = $0.48, SD = 0.40). That’s about $0.50 more than non-builders valued for the same box.

Experiment 1b - Method Summary

The researchers switched to a new product category to balance out the results. The participants were randomly divided into two groups, Builders and Non-builders. The builders were asked to either create an origami frog or crane, and the researchers offered the builders a chance to buy the creations they made with their own money.?

First, the researchers asked non-builders to bid on the builder’s origami to examine how far above the market price the origami builders priced their own creations.?

Second, origami experts were asked to make origami and solicit bids for these creations, allowing the researchers to see how close in value the novice participants (builders) placed their amateurish creations to those made by experts.

Experiment 1b - Results

1. Builders’ valuation of their origami (M = $0.23, SD = 0.25) was higher than non-builders were willing to pay for the creations (M = $0.05, SD = 0.07). $0.18 difference!?
2. Non-builders valued expert creation at $0.27. While non-builders saw builders’ amateurish creations as nearly worthless crumpled paper, the builders imbued their origami with value.?

Figure: Mean Willingness To Pay for the experiment 1b

Source: Harvard Business School Working Paper 11-091 | The “IKEA Effect”: When Labor Leads to Love

Experiment 2 - Hypothesis

While Experiment 1B showed that participants’ willingness to pay for their own creations was higher than that of dispassionate outside bidders, in Experiment 2, the researchers examined how participants’ bids for their own products compare to their bids for objectively similar products created by others.?

The researchers hypothesize that participants imbue products they have created with value. Thus, the researchers predicted that participants’ bids for products they successfully completed would be higher than their bids for the products others have successfully completed.

Experiment 2 - Method Summary

118 undergraduate and graduate students at a university in the northeastern United States who were approached in the student centre and dorms. In this experiment, the researchers used sets of Legos of 10 to 12 pieces. When completed, the sets resembled the shape of a helicopter, a bird, a dog, or a duck.

Participants were paired in twos and were randomly assigned one of the four Lego sets. Each pair were subjected to three (3) conditions:

• Endowment condition: participants were provided with a pre-assembled set of Legos
• Build condition: participants assembled a set of Legos themselves
• Unbuild condition: participants built a set and then took that set of Legos apart.

All participants were then told to place bids on their and their partners’ Lego sets. They were told that the highest bidder for each would pay their own bid amount and take the Lego set home.?Thus, the bidding procedure used in Experiment 2 required participants to consider their willingness to pay and their partner’s bids – a kind of market price.

Experiment 2 - Results

1. People were willing to pay more for the sets that they had been assigned (M = $0.54, SD = 0.69) than those assigned to their partners (M = $0.33, SD = 0.53),
2. Researchers observed that bids overall were highest in the build condition than in the unbuild and endowment conditions.
3. Participants valued their Lego sets more than their partners when they built them compared to when they were endowed with pre-assembled sets and when they built and unbuilt their sets.

Table: Mean Willingness To Pay for three Lego sets conditions. Source: Harvard Business School Working Paper 11-091 | The “IKEA Effect”: When Labor Leads to Love

Experiment 3 - Hypothesis

Researchers hypothesized that there is a basic relationship between the completion of tasks and the valuation of the products of that labour – such that whenever marketers can facilitate consumers’ building or customising their own products, their willingness to pay should increase.

In Experiment 3, the researchers allowed some participants to build an IKEA box, while others were allowed to complete only half of the steps to complete the box.

Researchers expected, consistent with Experiment 2, that failing to finish a product would lead to lower valuations than completing it. Most importantly, researchers measured participants’ general interest in building things themselves – asking them to rate the extent to which they were “do-it-yourself” people – to examine whether the boost in valuation from completing the box occurred only for those interested in building or for all consumers regardless of their stated interest.

Experiment 3 - Method Summary

39 participants at a university in the southeastern United States were randomly selected and paid $5 for completing the experiment. Participants were divided into two groups, Builders and Incomplete Builders.?

Builders are made to assemble an IKEA ‘Kassett’ box. These participants were given an unassembled box with the assembly instructions that come with the product.?

Incomplete Builders were given the same unassembled box with the exact instructions but were asked to stop before completing the last two steps. Thus, these participants also worked on their box but could not complete their creation; note that participants in this condition had all the pieces needed to complete the box, and little effort would be required on their part to complete the box if they chose to purchase it.

After the initial stage, the researchers solicited participants’ willingness-to-pay prices using the same incentive-compatible method as in Experiment 1A.

Finally, participants were asked to rate the extent to which they were a “do-it-yourself” person (DIYer), on a 7-point scale (1: not at all

a do-it-yourself person to 7: very much a do-it-yourself person).

Experiment 3 - Results and Discussion

1. Builders bid significantly more for their boxes (M = $1.46, SD = 1.46) than Incomplete builders did (M = $0.59, SD = 0.70)
2. Consumers who reported liking to build products rated the boxes higher than those who were relatively less interested in building products.
3. People who did not see themselves as DIYers showed the same increase in valuation when completing their products as those who did identify as DIYers

Table: Mean Willingness To Pay for IKEA’ Kassett’ box in the experiment cohort for Low and High DIY participants

How Can You Apply This Knowledge?

1. Humans have biases–the IKEA effect is just one of those biases. You tend to prefer or take more liking to things you are mentally invested in.
2. The above account suggests, and the research findings depict that labour leads to love only when that labour is successful.
3. While the above results suggest that consumers may pay a premium for DIY projects, they may still be unwilling to choose to engage prospectively in “do it yourself” projects.
4. Experimental results suggest that when managers persist in pursuing failed projects and concepts, they may do so because they genuinely come to believe their ideas are more valuable: Not pursuing them would be leaving money on the table, and using a competitor’s ideas would simply be choosing an inferior option.
5. Overvaluation that occurs as a result of the IKEA effect has implications for organisations more broadly, as a contributor to two key organisational pitfalls: sunk cost effects, which can cause managers to continue to devote resources to failing projects in which they have previously invested, and the “not invented here” syndrome, in which managers refuse to use perfectly good ideas developed elsewhere in favour of their – sometimes inferior – internally-developed ideas.
6. The IKEA effect may contribute to people’s reception to change due to the “not invented here” syndrome. (my illustration in the article header :))
7. The Harvard researcher’s exploration of the value that participants attach to their own labour is part of a broader trend in research exploring the psychology underlying consumer involvement, as companies have shifted in recent years from viewing customers as recipients of value to viewing them as co-creators of value.

What Have You Learned?

Let me know what you have learned and how it applies to you :)