Inter IKEA Systems B.V., trading as IKEA, is a Swedish multinational conglomerate that designs and sells ready-to-assemble furniture, kitchen appliances, decoration, home accessories, and various other goods and home services. Started in 1943 by Ingvar Kamprad and currently legally headquartered in the Netherlands, IKEA has been the world's largest furniture retailer since 2008. The brand name is an acronym of founder Ingvar Kamprad's initials; Elmtaryd, the family farm where Kamprad was born; and the nearby village of Agunnaryd, Kamprad's hometown in Småland.
Loss aversion is a psychological and economic concept, which refers to how outcomes are interpreted as gains and losses where losses are subject to more sensitivity in people's responses compared to equivalent gains acquired. Kahneman and Tversky (1992) suggested that losses can be twice as powerful psychologically as gains.
The peak–end rule is a psychological heuristic in which people judge an experience largely based on how they felt at its peak and at its end, rather than based on the total sum or average of every moment of the experience. The effect occurs regardless of whether the experience is pleasant or unpleasant. To the heuristic, other information aside from that of the peak and end of the experience is not lost, but it is not used. This includes net pleasantness or unpleasantness and how long the experience lasted. The peak–end rule is thereby a specific form of the more general extension neglect and duration neglect.
The anchoring effect is a psychological phenomenon in which an individual's judgments or decisions are influenced by a reference point or "anchor" which can be completely irrelevant. Both numeric and non-numeric anchoring have been reported in research. In numeric anchoring, once the value of the anchor is set, subsequent arguments, estimates, etc. made by an individual may change from what they would have otherwise been without the anchor. For example, an individual may be more likely to purchase a car if it is placed alongside a more expensive model. Prices discussed in negotiations that are lower than the anchor may seem reasonable, perhaps even cheap to the buyer, even if said prices are still relatively higher than the actual market value of the car. Another example may be when estimating the orbit of Mars, one might start with the Earth's orbit and then adjust upward until they reach a value that seems reasonable.
In psychology and behavioral economics, the endowment effect, also known as divestiture aversion, is the finding that people are more likely to retain an object they own than acquire that same object when they do not own it. The endowment theory can be defined as "an application of prospect theory positing that loss aversion associated with ownership explains observed exchange asymmetries."
Ready-to-assemble furniture (RTA), also known as knock-down furniture (KD), flat-pack furniture, or kit furniture, is a form of furniture that requires customer assembly. The separate components are packed for sale in cartons which also contain assembly instructions and sometimes hardware. The furniture is generally simple to assemble with basic tools such as hex keys, which are also sometimes included. Ready-to-assemble furniture is popular with consumers who wish to save money by assembling the product themselves.
The elaboration likelihood model (ELM) of persuasion is a dual process theory describing the change of attitudes. The ELM was developed by Richard E. Petty and John Cacioppo in 1980. The model aims to explain different ways of processing stimuli, why they are used, and their outcomes on attitude change. The ELM proposes two major routes to persuasion: the central route and the peripheral route.
A lifestyle brand is a brand that attempts to embody the values, aspirations, interests, attitudes, or opinions of a group or a culture for marketing purposes. Lifestyle brands seek to inspire, guide, and motivate people, with the goal of making their products contribute to the definition of the consumer's way of life. As such, they are closely associated with the advertising and other promotions used to gain mind share in their target market. They often operate from an ideology, hoping to attract a relatively high number of people and ultimately become a recognised social phenomenon.
In behavioral economics, willingness to pay (WTP) is the maximum price at or below which a consumer will definitely buy one unit of a product. This corresponds to the standard economic view of a consumer reservation price. Some researchers, however, conceptualize WTP as a range.
Dan Ariely is an Israeli-American professor and author. He serves as a James B. Duke Professor of psychology and behavioral economics at Duke University. He is the co-founder of several companies implementing insights from behavioral science. Ariely wrote an advice column called "Ask Ariely" in The Wall Street Journal from June 2012 until September 2022. He is the author of the three New York Times best selling books Predictably Irrational, The Upside of Irrationality, and The Honest Truth about Dishonesty. He co-produced the 2015 documentary (Dis)Honesty: The Truth About Lies.
The effort heuristic is a mental rule of thumb in which the quality or worth of an object is determined from the perceived amount of effort that went into producing that object. In brief, the effort heuristic follows a tendency to judge objects that took a longer time to produce to be of higher value. The more effort invested in an object, the better it is deemed to be. This is especially true in situations where value is difficult to assess or the evaluator lacks expertise in the appraisement of an item. People use whatever information is available to them and effort is thought to generally be a reliable indicator of quality.
Predictably Irrational: The Hidden Forces That Shape Our Decisions is a 2008 book by Dan Ariely, in which he challenges readers' assumptions about making decisions based on rational thought. Ariely explains, "My goal, by the end of this book, is to help you fundamentally rethink what makes you and the people around you tick. I hope to lead you there by presenting a wide range of scientific experiments, findings, and anecdotes that are in many cases quite amusing. Once you see how systematic certain mistakes are—how we repeat them again and again—I think you will begin to learn how to avoid some of them".
In economics, willingness to accept (WTA) is the minimum monetary amount that а person is willing to accept to sell a good or service, or to bear a negative externality, such as pollution. This is in contrast to willingness to pay (WTP), which is the maximum amount of money a consumer is willing to sacrifice to purchase a good/service or avoid something undesirable. The price of any transaction will thus be any point between a buyer's willingness to pay and a seller's willingness to accept; the net difference is the economic surplus.
The denomination effect is a form of cognitive bias relating to currency, suggesting people may be less likely to spend larger currency denominations than their equivalent value in smaller denominations. It was proposed by Priya Raghubir, professor at the New York University Stern School of Business, and Joydeep Srivastava, professor at University of Maryland, in their 2009 paper "Denomination Effect".
Query theory (QT) is a theory that proposes that preferences are constructed, rather than pre-stored and immediately retrievable by individuals in accordance with the answers to one or more internally posed questions, or queries. Further, the order of such queries is dependent on the structure of the choice situation or task, and can influence retrieval of information, leading to different decisions. This is a descriptive model that attempts to explain why individuals make a decision, rather than propose an optimal decision.
In psychology, ownership is the feeling that something is yours. Psychological ownership is distinct from legal ownership: for example, one may feel that one's cubicle at work is theirs and no one else's, even though legal ownership of the cubicle is actually conferred on the organization.
Michael Irwin Norton is the Harold M. Brierley Professor of Business Administration at Harvard Business School. He is also known for identifying and naming the IKEA effect.
Global furniture and homeware retailer IKEA has been criticized for various issues, including their raw material sourcing, the size of their stores, the impact of their stores on local communities, legal violations, and unfair or discriminatory business practices, among others.
The gift-exchange game, also commonly known as the gift exchange dilemma, is a common economic game introduced by George Akerlof and Janet Yellen to model reciprocacy in labor relations. The gift-exchange game simulates a labor-management relationship execution problem in the principal-agent problem in labor economics. The simplest form of the game involves two players – an employee and an employer. The employer first decides whether they should award a higher salary to the employee. The employee then decides whether to reciprocate with a higher level of effort due to the salary increase or not. Like trust games, gift-exchange games are used to study reciprocity for human subject research in social psychology and economics. If the employer pays extra salary and the employee puts in extra effort, then both players are better off than otherwise. The relationship between an investor and an investee has been investigated as the same type of a game.
The uncertainty effect, also known as direct risk aversion, is a phenomenon from economics and psychology which suggests that individuals may be prone to expressing such an extreme distaste for risk that they ascribe a lower value to a risky prospect than its worst possible realization.
