Selling an asset: how ownership can change its valuation
A team may refuse to sell equipment or a usage right at a price it would nevertheless be willing to pay to acquire it. The managerial question is precise: how can we distinguish economic value specific to the organisation from a valuation influenced by the mere fact of ownership?
What the literature establishes
Daniel Kahneman, Jack L. Knetsch and Richard H. Thaler (1990, Journal of Political Economy) observed in experiments involving goods including mugs that owners demanded more to give up an item than buyers were willing to pay. Their findings support the existence of an endowment effect: receiving an object can change its valuation and inhibit trade. They do not demonstrate that every gap between asking and offer prices arises from this mechanism.
What the valuation procedure can change
Charles R. Plott and Kathryn Zeiler (2005, American Economic Review) showed that this gap could disappear under a protocol designed to reduce participants' misconceptions, including training and practice. Their work challenges the idea that the observed gap alone is sufficient to establish an endowment effect. How a valuation is elicited is therefore part of the problem, rather than a necessarily neutral instrument.
The premature conclusion
One might conclude that managers necessarily overvalue their teams' resources. That would overlook the fact that equipment integrated into a process can have a use value above its market price, particularly when replacement requires validation or training. The point is not to eliminate every gap, but to make its justification explicit. (our executive and employee training programmes)
What the experiments cannot settle
Experimental exchanges of simple goods reproduce neither a medtech company's regulatory constraints nor the contractual rights attached to a licence. Within an organisation, buying and selling may also differ in their tax consequences, transaction costs or the availability of a substitute. These studies encourage scrutiny of the valuation procedure; they do not provide a coefficient for automatically correcting a price.
A practical check in Lausanne
In Lausanne, a medtech company, a higher education institution, an international sports organisation or a scale-up in the Lake Geneva region could use an actual equipment or usage-right decision as an exercise in SHR's « Prise de décision » programme. Before collective discussion, record separately the maximum acquisition price if the resource were not already owned and the minimum selling price, using identical assumptions about availability and replacement. Measure the gap in francs, then prepare a written reconciliation separating documented transfer, replacement and compliance costs from the unexplained remainder. This remainder is a question to investigate, not proof of bias; the check concerns whether the reconciliation exists and whether its justifications are traceable. To go further: explore the Decision-making training in Lausanne, or browse our executive and employee training programmes in Switzerland.
In pictures: Decision-making in Lausanne
- decision-making
- Lausanne
- research
- training lausanne