There are two cognitive biases that are especially useful to fundraisers.

One is the Endowment Effect, also known as the Ownership Bias. This bias causes people to value items or experiences they ‘own’ more than they would if they didn’t own them, and more than others value them. The other is what Dan Arielly has called the IKEA Effect, where individuals ascribe a greater value to items they have been involved in making than similar items that were made by someone else.

In this blog we share examples of how they can be useful.

A real-world test of the effect of IKEA and endowment

We decided to test the actual value of the IKEA Effect heuristic through a simple experiment: the Cakes for Charity experiment.

In this experiment we decided to measure first the value individuals would put on a cake they decorated against a cake one of their colleagues decorated. This was then compared with the price they would pay for professionally made cakes. Finally, an independent ‘judge’ was brought in to price the personal and professional cakes.

We gathered together a group of 10 individuals and they were told they would have to decorate a plain pre-made cake to be sold for charity in an office bake sale. Each individual was given a plain cake and a range of cake decorating items including sugar beads, sprinkles, icing etc. Each individual was asked to decorate their cake personally.

After everyone had finished decorating their cake they were asked to put a price on their product for the sale: how much they thought it was worth. This price was written on a post-it note beside their cake and then hidden from sight. They were also asked to anonymously put a price on the cakes of their colleagues and the commercial cakes.

Every individual of the ten placed a higher value on their own cake than those made by others. The difference between their estimate of their own cake’s value and that of their colleagues was almost 60%.

We then asked three independent ‘judges’ who had not been involved in any of the manufacture — but who liked cakes! — to allocate how much they’d be prepared to pay for each of the cakes, whether they be commercial or amateur. Here’s a summary of the findings:

• The commercially produced cakes — Sainsbury’s cupcakes — were valued at £2.40 a unit by amateur cake decorators and at £2.50 a unit by the independent reviewers. (The in-store price was removed to achieve a genuine comparison with no anchor.)
• Individuals valued their own self-decorated cakes most highly. They expected purchasers to pay a whopping £3.71 on average. Their peer cake decorators were only prepared to pay £2.21 on average for the same cake.
• While the cake makers valued their fellow cake makers work highly — at £2.21 a unit — there was a significant difference between the value they gave to their own confections. They allocated a premium of 60% to their own work.

Here’s the data:

Real world implications of endowment

The Endowment Effect is distinct, but overlaps with the IKEA Effect. Here are a number of real-world examples of how the Endowment Effect and the IKEA Effect complement each other.

• Fundraisers may keep trying to keep supporting an established programme they set up. For example: a gala dinner, even if it’s not very effective.
• Investors — even those who see themselves as super rational — may be reluctant to sell poorly performing shares they already own.
• Business owners like those in Dragons’ Den/Shark Tank will often seriously overvalue the enterprise they’ve built up, struggling to understand why experts disagree.
• Alumni may refuse to throw out an old university emblem — even a battered scarf — years after they graduated because it’s a symbol of their identity.
• Salespeople in a jewellery shop may encourage a potential purchaser to ‘try on’ a ring or necklace so it feels like theirs.
• Children —or at least their parents — will actually pay extra to Make a Bear rather than buy a made one.

The Endowment Effect and the IKEA Effect can be used in a range of pro-social settings to increase engagement, donations, and support. Here are some examples:

1. Naming Opportunities: When a donor’s name is attached to a physical or symbolic asset (e.g., a building, a fund, or project), they often feel a stronger sense of ownership and responsibility toward its success. For example: if a library wing is named after a donor, they’re more likely to continue supporting it.
2. Gift Personalization: Providing personalized thank-you letters or small tokens (such as a framed picture of a child whose life was improved by the donor’s contribution) increases the donor’s sense of connection to the cause.
3. Exclusive Titles: Giving volunteers or supporters specific titles such as “ambassadors” or “champions” of a cause increases their sense of belonging and ownership.
4. Membership Programs: Offering exclusive memberships (especially at the start, such as a “founding member” status in a new initiative) makes individuals feel like they have a personal stake in the organization’s success.
5. Investment and Microloans: In programmes like those by Lend with Care or Kiva, donors who fund microloans often feel a personal connection to the recipients and their entrepreneurial efforts, which encourages repeat contributions.
6. Sponsorships: Child sponsorship programmes like those run by UNICEF or Action Aid use the Endowment Effect by connecting donors directly with a child. The supporter therefore feels a personal sense of responsibility for the child’s well-being.
7. Project Milestones: Getting donors or stakeholders to lay a brick or plant a tree creates emotional investment at the start of a project, as does the chance to reinforce that investment and celebrate milestones like ribbon-cutting.
8. Pre-commitment Tools: Asking individuals to make a non-binding commitment to donate or volunteer later creates a sense of ownership in the cause, making them more likely to follow through. Pledge cards can do this.
9. Free Trials: Offering a first month free membership in a theatre, or access to a service with an option to contribute later (e.g. free attendance at a fundraising gala) can trigger the Endowment Effect. Once people experience the benefit, they are more likely to feel connected and contribute.
10. Souvenir: Giving prospects a memento of an event — like a mug or a pen — can create a sense of connection to a specific project. This can even apply to a nicely produced case for support left with a donor.

By creating opportunities for stakeholders to feel ownership — whether symbolic, emotional, or tangible — not-for-profits can effectively harness the Endowment Effect to deepen engagement and long-term commitment.

The IKEA Effect has an obvious link. If supporters feel they helped make something happen this can have an impact on the value they perceive. This could range from contributing to a case for support to actually taking a  hand in  laying a brick or planting a flower in a garden.