Endowment Effect Research Articles

Research on the impact of land rights certification on farmers’ operating behavior

This article aims to assess the impact of issuing land rights certification on farmers' operating behavior. To accomplish this objective, this paper establishes a theoretical framework for farmers' management behavior and thoroughly examines the stability, endowment, and security effects of land rights certification. Subsequently, using household survey data, the Probit and propensity score matching (PSM) estimation methods are employed to empirically substantiate the influence of farmland ownership confirmation. The verification results show that land right confirmation tends to motivate farmers to engage in agricultural management, and encourages female and older laborers to be more involved in agricultural production compared to males and younger laborers. Furthermore, the paper explores the mechanism by introducing such indicators as investment in agricultural machinery, quality of cultivated land, non-agricultural income of farmers, and laborers’ insurance status. Through analysis and testing, this paper holds that land right confirmation has a dual impact on farmer management, and when the reverse effect is limited, farmers are prompted to adjust the contradiction through labor force allocation within the family.

How can local government capacity lift the ‘resource curse’? A study from the perspective of industrial structure transformation

Industrial transformation is crucial for sustainable urban development and economic security. Although more studies have analyzed the relationship between resource endowment and urban industrial transformation, they have failed to include the key factor of local government capacity in the analysis. Based on the panel data from 267 cities in China from 2003 to 2018, the study examines the impact of resource endowment on industrial transformation and the role of local government capacity in it by using linear models and panel threshold models. This study finds that resource endowment promotes the development of the secondary industry in urban, but hinders the development of the tertiary industry. There is a moderating effect of local government capacity that mitigates the lock-in effect of resource endowment on industrial transformation. This moderating effect demonstrates heterogeneity among cities with different levels of resource endowment and geographic locations, and the results are robust. Furthermore, this study concludes that under different local government capacity, the moderating effect of local government capacity on the relationship between resource endowment and industrial transformation is nonlinear, and it also finds that the stronger local government capacity is not the better.

Endowment effects, expectations, and trading behavior in carbon cap and trade

We explain agents' trading behaviors and market outcomes in the presence of endowment effects intensified by expectations-based loss aversion in carbon cap and trade. Building on Kőszegi and Rabin (2006)’s model with forward-looking reference points, we show how firms' concerns about high future compliance costs (through loss aversion and uncertainty) can cause a gap between Willingness-to-Pay and Willingness-to-Accept for allowances. This leads to limited allowance trading and deviation from the socially desirable paths. The problem can be exacerbated under a substantial proportion of free allocation, a fixed (or inflexible) cap as well as uncertain regulatory ambitions, particularly in emerging economies under a variety of uncertainty. Recognizing the regulator's role in dealing with firms' expectations (or concerns) and facilitating innovation investments, we discuss potential alternative systems (e.g., with auction and flexible supply) for decarbonization that incorporate flexibility in terms of innovation timing and realized costs.

How to Weaken the Endowment Effect in the Housing Market? The Role of Behavioral Interventions

How to Weaken the Endowment Effect in the Housing Market? The Role of Behavioral Interventions

China's economic growth and low-carbon development under the background of resource curse: A new perspective based on digital finance

Does digital finance (DIF) in the digital age mitigate the economic challenges stemming from the resource curse and facilitate low-carbon development? This paper extends the theoretical framework of endogenous economic growth to investigate the interactive relationship among economic growth, low-carbon development, and the resource curse. Furthermore, it explores the pivotal role of DIF within this context. Subsequently, this paper employs Chinese provincial data from 2011 to 2020 to empirically examine the theoretical assumptions through econometric methods. The findings are as follows. First, DIF has the potential to stimulate economic growth, whereas resource endowment can impede it. Second, DIF significantly reduces carbon emission intensity (CEI); however, a high degree of resource endowment does not foster low-carbon development. Third, in the mechanism by which resource endowment influences economic growth, DIF exhibits a single threshold effect. When the DIF level surpasses 361.46, the negative relationship between resource endowment and economic growth shifts to a significant positive correlation. Regarding the mechanisms by which resource endowment impacts CEI, DIF shows a double-threshold effect. When DIF surpasses the second threshold, the significant positive impact of resource endowment on CEI becomes significantly negative. Fourth, DIF and resource endowment indirectly influence CEI through economic development. Fifth, the impact of DIF on CEI and the influence of resource endowment on economic growth are marked by resource endowment heterogeneity. DIF exhibits a double-threshold effect on the influence of resource endowment on economic growth in non-resource endowment regions. In resource-rich areas, as the DIF level rises, the significant positive effect of resource endowment on CEI intensifies. Conversely, in non-resource endowment regions, as the DIF level increases, the significant positive effect of resource endowment on CEI transforms into a significant negative effect.

A Taste of Telework: Effects of Remote Work Arrangements During and After the Global Pandemic

The COVID-19 pandemic brought unprecedented changes in global work dynamics including mandating telework for most of the U.S. federal workforce to protect employees from health and safety hazards of the communicable virus. Although not ubiquitous, many federal employees had experience with these arrangements because they voluntarily chose telework prior to the pandemic through provisions in the Telework Enhancement Act of 2010. Using the 2020 Federal Employee Viewpoint Survey (FEVS), which focuses on telework perceptions and experiences, this study explores the effect of the involuntary telework mandate on employees’ attitudes toward telework after several months through a prospect theory framework. Findings demonstrate that several factors including previous telework experience and experiential learning may influence employees’ preference for and voluntary selection into telework moving forward. These dynamics suggest an endowment effect for telework among employees who gained telework experience before and during the pandemic. In addition, employees may choose telework as an alternative work arrangement when they are not satisfied with their organizations or jobs but want to maintain employment. These findings suggest that agencies should continue to offer robust telework opportunities to satisfy and retain employees.

Why do aging households in agriculture prefer land abandonment to transfer? Evidence from hill plots in Sichuan, China

AbstractIncreased aging of the agricultural population may lead to a reconfiguration of land elements, but existing studies have not analyzed this on a plot level. China's vast hilly and mountainous regions will have a more serious impact on agricultural aging, but this context has still not received enough attention. Based on primary data from 2602 plots and 1080 farm households in the hilly areas of Sichuan, using human capital theory and instrumental variables approach, it is found that aging in agriculture will promote the abandonment of plots in the hilly areas, especially those that are remote, small in size and poor condition. Aging in agriculture will inhibit the out‐migration of plots in the hilly areas, and aging increases the abandonment of plots. In addition, this paper finds that the imperfect development of the land transfer market in hilly areas and the strong farmers' land endowment effect are the main reasons limiting land transfer. However, the inhibitory effect of the endowment effect diminishes with age. This study helps to rationally view the value of abandoned land and provides a new research perspective for parcel redistribution.

Conservative Bias and Endowment Effect in Investment Decision-Making Process: Development and Validation of Scale

Objective: This work aims to investigate two biases - conservatism and endowment effect - to then build an instrument capable of measuring them. Theoretical Framework: The advancement of studies in behavioral finance has led to the conclusion that individuals evaluate their gains and losses based on individual references. Thus, the perception from which they make decisions is individual and, therefore, subjective. Method: Based on a literature review, the main characteristics of both biases were collected and then a questionnaire was applied to a sample of 150 managers. The data collected from the answers to the questionnaire were subjected to exploratory factor analysis and Cronbach reliability test. Results and Discussion: The findings of this research highlighted three components to the conservatism bias. These components are: Conservatism in investment decisions, Conservatism and security, Conservatism in financing decisions. For the endowment effect, a component was identified and named with the same name as the effect. Research Implications: The indicators of the factor Conservatism in Investment Decisions show that managers are attached to information and past situations, so that they feel uncomfortable in the face of new scenarios. The indicators Conservatism and security and Conservatism in financing decisions indicated the preference for safer investments. The endowment effect indicators were lower, however, they were still able to highlight the indirect influence on the managers in the sample. This problem may arise from the nature of the assets managed by managers, in which established ownership is not perceived. Originality/Value: This study contributes to the literature by develop an instrument capable of identifying and measuring the conservatism and endowment effect biases of managers to pave the way for a discussion about the topic.

Applying behavioural economics principles to increase demand for free HIV testing services at private doctor-led clinics in Johannesburg, South Africa: A randomised controlled trial.

Expanding free HIV testing service (HTS) access to include private clinics could increase testing rates. A donor funded programme, GP Care Cell, offered free HIV testing at selected private doctor-led clinics but uptake was low. We investigated whether HTS demand creation materials that used behavioural economics principles could increase demand for HIV testing at these clinics. We conducted a randomised controlled trial in Johannesburg, South Africa (January-April 2022) distributing brochures promoting HTS to adults in five private doctor-led clinic catchment areas. Individuals were randomised to receive three brochure types: (1) "Standard of care" (SOC) advertising a free HIV test and ART; (2) "Healthy lifestyle screening" promoted free low-cost health screenings in addition to HTS; and (3) "Recipient of care voucher" leveraged loss aversion and the endowment effect by highlighting the monetary value of free HTS. The primary outcome was presenting at the clinic following exposure to the brochures. Logistic regression compared outcomes between arms. We found that of the 12,129 brochures distributed, 658 were excluded because of errors or duplicates and 11,471 were analysed. About 59% of brochure recipients were male and 50,3% were aged 25-34 years. In total, 448 (3.9%) brochure recipients presented at the private doctor-led clinics of which 50.7% were males. There were no significant differences in clinic presentation between the healthy lifestyle screening and SOC arm (Adjusted Odds Ratio [AOR] 1.02; 95% CI 0.79-1.32), and similarly between the recipient of care voucher and SOC arm (AOR 1.08; 95% CI 0.84-1.39). Individuals were more likely to attend centrally-located clinics that had visible HTS branding (AOR = 5.30; 95% CI: 4.14-6.79). Brochures that used behavioural insights did not increase demand for HTS at private doctor-led clinics. However, consistent distribution of the brochures may have potential to increase HIV testing uptake at highly visible private doctor-led clinics.

From the Inertia of Tradition to Organizational Absorption of Strategy Practices: A Grounded Theory Study in Indian Higher Educational Institutions

The study examines how higher educational institutions navigate from the inertia of tradition to organizational absorption of strategy practices. The grounded theory approach was adopted for data collection and data analysis. The thematic analysis method was adopted to condense the raw data into a few meaningful themes. There were four reasons for the continuity of inertia of tradition: groupthink inertia, fear-inducing inertia, skepticism, and the endowment effect. The study found seven orientations of organizational absorption: cognitive-oriented absorption, intractability-oriented absorption, exigency and adaption-oriented absorption, endurance-oriented absorption, “tradition-hazard”-oriented absorption, transposition-oriented absorption, and employee agility-oriented absorption. There were three dimensions of organizational absorption: Structural, processual, and procedural. The study found four themes for leadership manipulations as stimuli for cultural transitions for absorption: leadership decisiveness, embracing change-seeking culture, openness and benchmarking, and dynamic decision-making.

The Impact of Investor Expectation on the Financial Decision-Making

Unlike traditional finance, behavioral finance challenges the traditional financial theory of investor rationality, emphasizing that investors are not absolutely rational in real life. This perspective provides new insights for understanding and predicting financial markets. This study examines core concepts in behavioral finance, such as loss aversion, market anomalies, momentum effects, reversal effects, endowment effects, and framing effects, and analyzes how they influence investors' financial decisions. These concepts highlight the significant role of human psychology and behavior in shaping financial decisions, thus aiding investors in making more rational choices in complex financial markets. Loss aversion, for instance, suggests that investors are more sensitive to losses than to gains, leading to suboptimal decision-making. Market anomalies, such as price bubbles and crashes, indicate that markets are not always efficient. Momentum effects suggest that past stock performance can predict future trends, while reversal effects point to the tendency of extreme stock performances to revert to the mean. The endowment effect reveals that individuals value their own possessions more highly than similar items they do not own. Lastly, framing effects demonstrate how the presentation of information can influence decision-making. Future research can delve deeper into how the framing effect can be harnessed to improve the design and marketing strategies of financial products, thereby enhancing the efficiency and effectiveness of investment decisions. This exploration could lead to more sophisticated financial products and better-informed investors, ultimately contributing to a more stable and efficient financial market.

Urban-rural disparities in minimum acceptable diet intake among children aged 6-23 months in Ethiopia: A multivariable Decomposition analysis of Ethiopian demographic and health survey 2019.

The achievement of the minimum acceptable diet intake (MAD) stands at 14% among urban and 10% among rural under-five children in Ethiopia. Consequently, identifying the determinants of the urban-rural gap is vital for advancing Sustainable Development Goals (SDGs), fostering healthier communities, and developing evidence-driven approaches to enhance health outcomes and address disparities. The objective of the study was to decompose the urban-rural disparities in minimum acceptable diet intake in Ethiopia using the Ethiopian Mini-Demographic and Health Survey 2019 data. The study was conducted using the Ethiopian Demographic and Health Survey 2019 report. A total of 1,496 weighted children aged 6-23 months were included using stratified sampling techniques. The main outcome variable minimum acceptable diet was calculated as a combined proportion of minimum dietary diversity and minimum meal frequency. A decomposition analysis was used to analyze the factors associated with the urban-rural discrepancy of minimum acceptable diet intake, and the results were presented using tables and figures. The magnitude of minimum acceptable diet among children aged 6-23 months in Ethiopia was 11.0%. There has been a significant disparity in the intake of minimum acceptable diet between urban and rural under-five children with 14 and 10%, respectively. Endowment factors were responsible for 70.2% of the discrepancy, followed by 45.1% with behavioral coefficients. Educational status of college and above was responsible for narrowing the gap between urban and rural residents by 23.9% (β = 0.1313, 95% CI: 0.0332-0.245). The number of children in the household and the age of the child between 18 and 23 months were responsible for widening the gap in minimum acceptable diet intake discrepancy between urban and rural residents by 30.7% and 3.36%, respectively (β = -0.002, 95% CI: -0.003 to -0.0011 and β = -30.7, 95% CI: -0.025 - -0.0085). From the effect coefficients, the effect of institutional delivery was responsible for 1.99% of the widening of the gap between urban and rural residents in minimum acceptable diet intake (β = -0.0862, 95% CI: -0.1711 - -0.0012). There is a significant variation between urban and rural residents in minimum acceptable diet. The larger portion of the discrepancy was explained by the endowment effect. Educational status of mothers with college and above, parity, age of child, and place of delivery were the significant factors contributing to the discrepancy of minimum acceptable diet intake between urban and rural residents.

Bilateral trade with loss-averse agents

AbstractWe introduce expectations-based loss aversion, which can explain the empirically well-documented endowment and attachment effect, into the classical bilateral-trade setting (Myerson and Satterthwaite in J. Econ. Theory 29:265–281, 1983). We derive optimal mechanisms for different objectives and find that relative to no loss aversion, the platform designer optimally provides agents with partial insurance in the ownership dimension and with full insurance in the money dimension. Notably, the former is achieved either by increasing or decreasing the trade frequency, depending on the distribution of types. Finally, we show that the impossibility of inducing materially efficient trade persists with loss aversion.

Exploring reference-dependency in route switching behavior on intercity travel: Endowment effect and disparities between willingness to pay and willingness to accept

This study explores asymmetric preferences in route switching behavior on intercity travel. A reference-dependent travel choice model reflecting the endowment effect is empirically compared with the classical symmetric travel choice model to investigate the significance of the reference-dependency. Based on the application to stated preference data, our results reveal that the reference-dependent travel choice model outperforms the classical symmetric travel choice model in route switching decision, indicating the significant disparities between WTA and WTP. It implies that policy making based on the results of the classical symmetric model assuming equivalent WTA and WTP could lead to the overestimation of switching demand. Furthermore, our results show that drivers are more heterogeneous in terms of WTA than WTP. Moreover, our applications of the latent class mixed logit structure indicate that most of the responded drivers show reference-dependency in route switching decision. Our findings in this study are essential in transport network policy making.

Insights into the flavor endowment of aroma-active compounds in cloves (Syzygium aromaticum) to stewed beef

Clove (Syzygium aromaticum) is one of the most commonly used spices in stewed beef to enrich and improve its aroma during the stewing process. Gas chromatography ion mobility spectroscopy (GC-IMS), Q Exactive GC-Orbitrap-MS-O (QE-GC–MS/O), combined with sensory evaluation were employed to analyze the flavor endowment of aroma-active compounds in cloves to stewed beef. A total of 173 volatiles were identified in the clove powder (CP), stewed beef with clove (SBC), and stewed beef with salt (SBS), of which 21 volatiles were considered as aroma-active compounds. The concept of flavor endowment of aroma-active compounds in cloves was defined innovatively, and the endowment rate values (ERVs) of stewed beef were calculated. Nine aroma-active compounds in cloves were found to have a flavor endowment effect on stewed beef, while the terpenoids exhibited high ERVs. Despite the low ERV of eugenol, it still significantly impacted the aroma profile of SBC due to its high odor activity value (OAV) and flavor dilution (FD) factor. These volatiles offered mainly the clove, herbal, anise, and floral odor to stewed beef, which was also confirmed by sensory evaluation. These findings indicated that the terpenoids, phenolics and ethers in cloves had a significant influence on the overall aroma of stewed beef through the flavor endowment, which contributed to the precise use of cloves and improved the aroma of stewed beef.

Evolving connections: Understanding the dynamics behind the Sino-foreign sister city network

Sister city relationships bolster trust and facilitate deeper interactions between international cities, acting as key enablers for transnational cooperation. However, less is known about the driving factors for the dynamic evolution of sister city networks. Accordingly, our study leverages data from Sino-foreign sister cities and applies the stochastic actor-oriented model (SAOM) to analyze the evolution process of these networks. We examine the driving roles of network structure characteristics, sister city attributes, and control variables. Key findings include that network density (outdegree) positively and insignificantly influences the formation of these networks, while activity plus popularity foster these connections. For city attributes, institutional distance and geographical similarity (both coastal cities) play a positive driving force in the development of sister cities. By contrast, cultural distance similarity negatively affects the dynamic development of these ties. Most interestingly, three control variables exhibit different effects on Sino-foreign sister city networks. Economic level and opening-up degree of cities exert positive and significant effects on the evolution of networks. By comparison, the effect of resource endowment of cities on network evolution presents a negative and significant driving force. In addition, this study also examines spatial heterogeneity in the evolution of Sino-foreign sister city relationships across different continents. These findings can help urban diplomacy practitioners to formulate and implement sister city planning policies and promote the efficiency of Sino-foreign cities in establishing sister city relationships.

A decompositional analysis of social group inequality in India

ABSTRACT Using the national representative Indian household surveys collected by the National Sample Survey Organization, we examine the welfare gaps across social groups for the entire distribution in 1983, 1993–94, 2004–05 and 2011–12. We use spatially adjusted per capita consumption expenditure as the measure of welfare and show that there exists significant welfare gap between Scheduled Tribes/Scheduled Castes (ST/SC) and General Category (GC) households at higher quantiles of the distribution, but the magnitude of the gap has declined over the years for the SC households. Using unconditional quantile regression decomposition, we find that the coefficient effect (unexplained effect) dominates the endowment effect (explained effect) in explaining the gap in all four years. Further decomposition shows that the difference in educational distribution between the SC/ST and GC households drives most of the explained differences between the social groups.

Behavioral Finance: The Impact of Investor Expectation on the Financial Decision-Making

This paper offers a comprehensive exploration of fundamental concepts in behavioral finance and their repercussions on financial markets. Initially, it scrutinizes the efficient market hypothesis, highlighting disparities between its idealized assumptions and the complexities of real-world markets. Subsequently, it investigates the impact of loss aversion on investor behavior and its propensity to generate market anomalies. Moreover, the paper delves into the influence of framing theory and the endowment effect on investors' perceptions and decision-making processes, elucidating how cognitive biases can distort market dynamics. By synthesizing these theories, the paper presents a coherent framework for analyzing markets through a behavioral finance lens. It asserts that investors stand to benefit from a thorough comprehension and utilization of behavioral finance principles, enabling them to make more reasoned and efficacious investment choices. It concludes that investors can enhance their decision-making by embracing the principles of behavioral finance, thus contributing to a more rational and efficient market overall.

IMPACT OF ENDOWMENT EFFECT ON CUSTOMER PURCHASING BEHAVIOUR

An instance known as the endowment effect occurs when someone values an item they currently possess more highly than they would if they did not own it. Things that are emotionally or symbolically significant to an individual can be a good example of the endowment effect. "Ownership" and "loss aversion" have been found to be the two primary psychological factors driving the endowment effect. Companies frequently attempt to capitalize on this cognitive bias in marketing, which is closely related to the endowment effect. If investors have a well-defined investment strategy that includes a timetable for selling particular investments, they can mitigate the endowment effect. This article focuses on exploring the facts, and importance of the endowment effect on purchases and sales as well. Keywords: endowment effect, cognitive bias, marketing, investment, strategy, psychological factors

Right thalamic volume mediates impact of the dopamine beta-hydroxylase gene on the endowment effect

The endowment effect is a tendency that individuals overvalue items belonging to them relative to those items that do not. Previous studies showed a strong relation between the dopamine beta-hydroxylase (DBH) gene and the endowment effect (EE), and a link between EE and task-based functional MRI activation in multiple brain regions. However, the role of brain structure on EE remains unclear. In this study, we have explored whether regional brain volume mediate the effect of the DBH gene on EE. Results showed that rs1611115, single-nucleotide polymorphisms (SNPs) at DBH loci, were significantly associated with right thalamus volume and the endowment effect in males but not in female participants. Specifically, male DBH rs1611115 T-carriers had larger right thalamus volume compared to carriers of CC genotype and exhibited a greater endowment effect. Importantly, we found that right thalamus volume mediated the effect of rs1611115 on the endowment effect in male participants. This study demonstrated how thalamic volume plays an important mediating role between genetics and decision-making in humans.