money health weekly


How Return Policies Nudge You to Buy More

return policies get you to spend more

❝Ownership causes us to value things in ways that have little to do with actual value.❞ -Dan Ariely

My wife and I are sitting on a rock staring down at the tops of the trees. Beyond the trees, we can see the city of Boulder, Colorado, and off in the distance, we can see Denver. It's windy up here and quite scary. We wouldn't have climbed this close to the edge if so many other people hadn't done it already. Fear aside, this is pretty cool.

As we sit outside and enjoy the sunshine and the wind high above Boulder, I complain - again - about the quality of my hiking pants. They are worn out, don't fit quite right anymore, and don't have all the features I'd like. My wife reminds me that I've been saying this for a year, and I haven't done anything about it. She suggests going to an outdoor recreation store when we get back to Denver to find some new pants. I resist, of course, because these pants work just fine. My wife tells me that that argument might make sense if I hadn't just finished complaining about them.

Back in Denver, we go to the store, and I'm having difficulty deciding. We found pants from three different brands that all seemed pretty good. There was a slight difference in the cost of each brand, and now I'm trying to decide if it's worth the extra $20 to get the more expensive pair or not. I'm really struggling with this decision. I go back and forth, and then I go back and forth again. I'm stuck in a sort of analysis paralysis situation.

The salesperson tells me that it might make sense if I just buy all three pairs. Then, I'll have them at home, and I'll have more time to decide which pair works best for me. I can always return the ones that don't work, she says. I told her that that sounds great except for the fact that I don't live in town. She simply reminded me that I could return these pants to any store, including the store back at home.

Brilliant! I'm fortunate enough to be able to afford all three pairs right now, especially knowing that I'm going to get two-thirds of that money back when I return the pants I don't want.

Over a year later, I still have all three pairs.

That's not a fluke nor an accident. The salesperson and the managers of the store know very well how consumers behave. They designed their return policy around that.

return policies exist because they know you won't take it back


Return policies are driven heavily by what psychologists call the endowment effect. The endowment effect simply says that if you own something, you will think it is worth more than if you didn't own it.

Think about your home for a second. The value of your house to you represents not only the market value but also the value of all of the good memories you hav