AEG Uses the Endowment Principle with Jackson Concert Ticket Holders
According to an article on CNN.com, the concert promoter for Michael Jackson's "This is It" concert series in London has announced that ticket holders will have their choice of a refund or a souvenir. The souvenir? A commemorative ticket conceived by Jackson himself. There are eight designs, which will be posted on michaeljacksonlive.com in coming days.
It's a shrewd business deal on the part of AEG, the concert promoter. Ticket revenues for the concert series are rumored to be in the range of 85 million dollars. They've certainly spent money already on the preparation and marketing of the event, which leaves them in a tough spot if they end up giving all the money back. Instead, they've created an option which plays on the endowment principle.
The endowment principle is the idea that when a person comes into possession of something, they automatically perceive its value to be higher than what they acquired it for, thus they are less likely to get rid of the item even when offered the full value they had to give up to get it in the first place. Like an endowment, while we have a thing its value grows.
In this case, tickets for the Jackson concert were reportedly a minimum of $105. Imagine that you hold a ticket to this concert, and that you paid $105 for it, but now you can't even go. Some people will immediately think, "Now this ticket is worthless." Others will have an "Aha!" moment in which they realize they are holding onto a piece of music history. The ticket for a concert that the King of Pop never got to perform at? It will have value to someone. And somebody at AEG realized this.
For some people, those tickets are now priceless. The opportunity to trade the ticket for a commemorative souvenir will be worth more to many people than the $105 (or more) that they paid for the tickets in the first place. Some will be profit-driven. They'll think of how much they'll be able to sell it for on Ebay. Others will be motivated only by the thought of having a somewhat rare piece of Michael Jackson's creativity. In any case, I suspect that AEG will get to hold on to quite a bit of the money that they collected.
The endowment principle isn't hypnotic, but it's one of those related areas of influence that I think is interesting to study. Like any tool, it can be used ethically or unethically. It's important to understand this kind of stuff if you want to better understand why you make decisions the way you do. Each of us makes a fair amount of our decisions based on emotions rather than logic, and the endowment principle is one example of how that happens.


