Opinion · Psychology (Behavioral Economics)
Before my free month of YouTube Premium, ads were just part of watching videos. Then the trial ended, and the ads came back. I found I couldn’t stand watching with them anymore. So I subscribed, and I’m still subscribed today.
Nothing about the ads had changed. What changed was me. For one month, an ad-free screen had been mine, and getting the ads back felt like having something taken away. Psychologists call this the endowment effect, and I think it explains why free trials work so well.
A mug becomes worth more in a few minutes
The endowment effect is simple to state. Once something is mine, I value it more than I would if it weren’t. The surprise is how little it takes.
In a 1990 paper, Daniel Kahneman, Jack Knetsch and Richard Thaler ran a test with coffee mugs at Simon Fraser University. Some students got a mug and could sell it. Others could buy one. A third group could pick either the mug or cash.
The sellers’ median price was $7.12. The buyers’ was $2.87. That is a gap of more than two to one for the same mug, handed out minutes earlier.
No one had grown attached to it. There were no memories. It had simply become theirs.
The pain is in letting go
The third group is the clever part. The choosers were not giving anything up, so they were in the same spot as sellers, minus the ownership. Their median value was $3.12, almost the same as the buyers.
So the mug didn’t look better to its owners. Handing it over just felt like a loss. This links the endowment effect to loss aversion, the idea that losing something hurts more than gaining the same thing feels good. I covered a cousin of this in my piece on the sunk cost fallacy, where selling a losing stock feels like admitting defeat.
Put in my own words, things I own get a higher price tag in my head than the same things on someone else’s shelf. And the gap is widest at the moment I’m asked to hand them over.
This also explains when the effect shows up. You rarely notice it while you own something. You notice it at the exit: when you sell, throw away, cancel or return.
It works on things you can’t hold
An ad-free screen is not a mug. You can’t pick it up or put it on a shelf. But the feeling of “this is mine” doesn’t need an object.
Researchers call that feeling psychological ownership. Jon Pierce, Tatiana Kostova and Kurt Dirks described it in 2001 as a sense of ownership that exists apart from any legal title. It grows when you use something, control it and get used to it.
A month of YouTube with no ads checks those boxes. Every video I watched that month played without a break. By the end, ad-free had become my normal, the baseline I compared everything else to.
That is why the ads felt worse after the trial than before it. Before, ads were the starting point. After, ad-free was the starting point, and every ad became a small loss. The video was the same. My reference point had moved.
Mugs, store shelves and card shows
The same pattern turns up in very different places. Each one adds something to the picture.
Nobody wanted to trade
In a 1989 study, Jack Knetsch gave University of Victoria students either a coffee mug or a large Swiss chocolate bar. Then he offered each student a swap.
Among students who started with a mug, 89% kept it. Among those who started with chocolate, about 90% kept the chocolate. A third group with nothing in hand split close to evenly, with 56% choosing the mug. Whatever they got first was what they wanted.
Touching before buying
Ownership can start even before you pay. Joann Peck and Suzanne Shu found that merely touching an object raised people’s sense that it was theirs. That, in turn, raised what they were willing to pay for it.
The researchers pointed to stores that invite you to pick up the product, like Apple with the iPhone. They also named free trials as a likely example of the same effect. A hand on the phone and a month of ad-free videos do the same job.
The traders who stopped feeling it
Here is the case that pushes back. Economist John List studied real traders at sports card shows in a 2003 paper. Casual collectors showed the usual endowment effect.
Experienced dealers barely showed it at all. People who buy and sell every day learn to treat items as stock, not as “mine.” The effect is strong, but it isn’t fixed. Practice at letting go can shrink it.
How big is the effect, really?
It is fair to ask whether the classroom numbers are too neat. Some economists have argued exactly that.
Charles Plott and Kathryn Zeiler repeated the mug-swap test in a paper first circulated in 2005. With the usual setup, 84% of mug owners kept their mugs, much like Knetsch found. Then they removed details that could hint at value, such as calling the mug a gift or asking people to raise hands in public.
With those controls in place, the gap disappeared. Only 54% of mug owners kept their mugs.
I read this as a useful warning, not a knockout. The effect may be smaller and more fragile in a lab than the famous numbers suggest. But a free trial isn’t a careful lab. It is built to make you use the product, get used to it and feel it as yours. Those are the conditions where the effect has the most room to grow.
Why the trial is free and the exit isn’t
Once you see this, the design of a free trial makes sense. The company isn’t really giving away a month. It is moving your reference point.
Before the trial, the paid plan is a gain you could add. After the trial, it is the normal you are used to, and stopping is a loss you would have to accept. One way to read it: the trial turns a buying decision into a giving-up decision. Giving up is the harder one.
Most trials also renew on their own. That adds a second push, the one I wrote about in the default effect. If you do nothing, you keep paying. So you would have to act to give up something that already feels like yours.
The effect isn’t only for consumers, either. A creator who sold his life’s work can feel it decades later, as I wrote about with Richard Garriott and the Ultima rights. Legal ownership can leave long before the feeling of ownership does.
The value is real. The viewpoint moved.
None of this means a subscription is a trick. Ad-free videos are a real benefit. The endowment effect doesn’t create fake value out of nothing.
What it changes is where you stand when you judge the value. From the “not mine” side, a thing is a gain you could add. From the “mine” side, the same thing is a loss you would suffer. The second view almost always puts a higher price on it.
So when a free trial ends, or a closet needs clearing out, one quick test helps. Imagine you didn’t have it. Would you go out and buy it today, at this price? If yes, keep it without guilt. If not, what you’re paying for isn’t the thing. It’s the feeling of not losing it.
Editorial note: This piece grew out of studying a psychology concept rather than following a trending news story. Researchers still debate how large the endowment effect is outside the lab, so the study numbers here are examples, not fixed rules. The featured image is AI-generated.