Another cluster of biases governs how we assign value, especially to things we own or have invested in. The sunk cost fallacy traps us into continuing failed courses of action because of what we have already invested, even when abandoning would be objectively wiser, as when one finishes a bad movie because the ticket is already paid for. The endowment effect inflates the value of items simply because they are ours, leading us to demand more to sell an object than we would pay to acquire the same item. Mere exposure compounds this: the more familiar something is, the more we tend to prefer it, even without conscious awareness, which is why repeated exposure to songs, faces, and brands tends to breed liking.
Loss aversion, a cornerstone of Kahneman and Tversky's prospect theory, captures a striking asymmetry: losses feel roughly twice as painful as equivalent gains feel pleasurable. Prospect theory more broadly describes how people make decisions involving risk, with reference dependence, loss aversion, and diminishing sensitivity to gains and losses as its key insights. The disposition effect in investing is a clear example: investors tend to sell winning positions too quickly to lock in gains while holding losing positions too long to avoid realizing losses. The framing effect, choice architecture, and contrast effect all exploit these tendencies, because the same outcome presented as a gain or a loss, in isolation or alongside alternatives, can feel dramatically different. Choice overload, popularized by Barry Schwartz, shows that too many options can lead to decision paralysis, anxiety, and post-decision regret rather than more freedom.
Our sense of scale also distorts value in predictable ways. The identifiable victim effect makes us respond far more powerfully to a single named person in need than to statistical millions, captured in the observation that "one death is a tragedy; a million is a statistic." Scope insensitivity (or scope neglect) takes this further: our willingness to pay barely budges when the size of a problem changes by orders of magnitude, so donations to save 2,000 birds are often similar to those to save 200,000 birds. The denomination effect reveals a monetary analogue: people spend more freely when using small denominations or electronic payment than when using large bills, because they are reluctant to break a large bill. Zero-risk bias leads us to favor completely eliminating one small risk over a larger overall risk reduction. The IKEA effect shows that we place higher value on things we helped create, regardless of objective quality. The ambiguity effect adds a final layer: when outcomes are uncertain, people prefer known risks over unknown ones, even when the unknown option may well be better.