Endowment Effect Research Articles

How Gender Segregation in Higher Education Contributes to Gender Segregation in the U.S. Labor Market

What is the relationship between gender segregation in higher education and gender segregation in the labor market? Using Fossett's (2017) difference-of-means method for calculating segregation indices and data from the American Community Survey, we show that approximately 36% of occupational segregation among college-educated workers is associated with gender segregation across 173 fields of study, and roughly 64% reflects gender segregation within fields. A decomposition analysis shows that fields contribute to occupational segregation mainly through endowment effects (men's and women's uneven distribution across fields) than through the coefficient effects (gender differences in the likelihood of entering a male-dominated occupation from the same field). Endowment effects are highest in fields strongly linked to the labor market, suggesting that educational segregation among fields in which graduates tend to enter a limited set of occupations is particularly consequential for occupational segregation. Within-field occupational segregation is higher among heavily male-dominated fields than other fields, but it does not vary systematically by fields' STEM status or field–occupation linkage strength. Assuming the relationship between field segregation and occupational segregation is at least partly causal, these results imply that integrating higher education (e.g., by increasing women's representation in STEM majors) will reduce but not eliminate gender segregation in labor markets.

<p>The Multifaceted Dimensions of the Wage Gap in Ecuador</p>

This study examines the determinants of wage gap differences based on gender, ethnicity, and area of residence (urban vs. rural) in Ecuador for the years 2007 and 2017. By combining the Oaxaca-Blinder decomposition with unconditional quantile regression, we identify the extent to which the wage gap between two groups is due to characteristics (endowment) or unexplained factors at various points of the distribution, i.e. for low-, medium- and high-income workers. Results show that, on average, the gender and ethnic wage gap in 2017 increased slightly with respect to 2007, while the area wage gaps remained stable. However, progresses have mainly benefited those at the top of the income distribution, while disparities have widened for those at the bottom. As regards endowment effects, education mainly explains area and ethnicity wage gaps, while there is an important unexplained part that contributes more to gender wage differentials.

Sales Strategy, Risk Investment and Property Rights Allocation: Analysis Based on Endowment Effect

The endowment effect suggests that people value what they have now and the status quo, and thereby want to avoid losing what they have or just step out of the comfort zone. Several scholars have identified and demonstrated that people’s utility is reduced by a given quantity of loss more than it is increased by an equal amount of gain. Due to the endowment effect, the decision-making process is out of balance, and are more likely to avoid harm rather than pursue profits. This paper reviews the concepts, experiments and applications of endowment effect and loss aversion theory in behavioral economics. Furthermore, it explains endowment effect using three economic applications of sales strategy, risk investment and property rights allocation. In all the three economic applications, people’s economic behavior totally conforms to the endowment effect: people buy things that they don’t need, make the investment irrationally, or bring trade frictions. Due to its commonness, endowment effect has been widely tested and applied, attracting heated discussion among academia research and policy regulators. In this sense, this paper also provides us a good understanding of endowment effect and behavior economics.

Analysis of Willingness to Pay for Second-hand Clothing from the Perspective of Endowment Effect

The study analyzes the influential factors of the willingness to pay (WTP) in the used clothing market, and the endowment effect is taken into consideration. Endowment effect means that people tend to have a higher evaluation of what they own than before, and although endowment utility is a psychological behavior, it plays a very great influence in reality, and this influence cannot be ignored. This research first introduces the theoretical concept of WTA-WTP. WTA is the selling price the seller is willing to accept, while WTP is the price the buyer is willing to pay and describes which factors change the WTP. The WTP is the maximum price a consumer will pay, and the WTA is the minimum price a consumer will accept. When a consumer will trade for a good, it means that WTP equal to the WTA. The final factors influencing WTP can be divided into reference price, mental factors of purchase intention for basic physical needs, ecological concern and hedonism. The paper holds that all these factors affect buyers' willingness to pay from the perspective of endowment effect.

Success Secret of Apple: How Does It “Manipulate” Consumers’ Behaviors

Apple is one of the most successful companies in the electronic products industry. Its success is indispensable to its effective marketing strategies. This paper focuses on analyzing the psychological trick it used in its marketing strategy, mainly the endowment effect and status quo bias. It investigates how Apple uses these cognitive biases to attract newcomers to use its products and how it cultivates loyal consumers. The endowment effect refers to a circumstance to which an individual attaches higher importance to the object that they own than the same object they do not own. Apple's showroom enables consumers to play around with its products which gives the consumer a sense of ownership that make consumers become more painful to relinquish its product. Status quo bias describes the circumstance where people prefer to maintain the current state and are reluctant to change. It helps Apple to keep the existing consumers around, which also gives Apple more incentive to constantly upgrade its products and induce consumers to buy. Lastly, this paper will discuss what consumers could do to avoid being “manipulated” by Apple’s marketing strategy and falling into the consumption trap.

What’s behind increasing wage inequality? Explaining the Italian case using RIF-OLS

This paper aims to identify how and to what extent the Italian labour market structure, in terms of job composition and institutional changes, shaped the dynamics of wages and wage inequality in the decade between 2007 and 2017. We investigate the main determinants behind the rise in wage inequality in Italy by using Recentered Influence Function (RIF) regressions. This econometric approach allows—on the one hand—to directly assess the effects on the unconditional distribution and on “beyond the mean” statistics, like the Gini coefficient. On the other, it decomposes inequality into endowment and wage effects, following the standard Oaxaca-Blinder technique. We observe that working structures and institutional changes—contractual arrangements (permanent vs temporary contracts) and working hours (full-time vs part-time)—are the main factors in explaining the deterioration in wages at the bottom of the income distribution scale, and the consequent increase in wage inequality.

Using an evolutionary approach to improve predictive ability in the social sciences: Property, the endowment effect, and law

Using an evolutionary approach to improve predictive ability in the social sciences: Property, the endowment effect, and law

중고거래 플랫폼에서의 소유효과에 관한 연구

The purpose of this study is to examines how the endowment effect in second-hand trading platforms differs depending on product type and materialism. We classified into products into material goods and experiential goods, and predicted that the endowment effect would be greater in experiential goods than in material goods. In addition, unlike experiential goods, in material goods, it is expected that the endowment effect would vary depending on materialism.
 To test our hypotheses, a total of 312 people were surveyed online. The results showed that the gap between willingness to accept(WTA) and willingness to pay(WTP) for experiential goods was larger than the gap between WTA and WTP for material goods. In other words, it was confirmed that the endowment effect is greater in experiential goods than in material goods. However, it was found that the endowment effect on material goods did not vary depending on materialism, and therefore, the impact of materialism on the endowment effect could not be confirmed.

Public spending and the resource curse in WAEMU countries: An asymmetry analysis using the hidden cointegration and non-linear panel ARDL framework

In this paper, we analyze the long-run effect of natural resource endowment on total public spending, public education spending, and public health spending in WAEMU member countries. After checking the cross-section dependence and unit root of the variables, this study uses the pooled mean group estimation technique within linear and non-linear panel ARDL models to investigate (a)symmetry effects in the relationship between variables. empirical results suggest that the resource curse hypothesis holds, meaning that natural resources adversely affect public spending. Across multiple specifications, our results support also the crowding-out effect and the institutional channel through which natural resources impact public spending. It seems therefore that the WAEMU countries still fail to transform the resource wealth advantage into favorable development outcomes. In light of the results, a few policy options are discussed in this paper.

Decomposing the impacts of an agricultural value chain development project by ethnicity and gender in Nepal

This paper estimates the impact of an inclusive agricultural value chain development project on agricultural productivity and decomposes the impact by gender and ethnicity of producers. The intervention sought to alleviate poverty among small-scale producers by increasing agricultural productivity and lowering transaction costs. It also specifically targeted minority and female producers to ensure inclusivity. We use primary survey data from over 2,500 households in rural Nepal. We estimate the impact on agricultural productivity by employing a treatment effect estimator, and decompose it by gender and ethnicity using the Kitagawa-Oaxaca-Blinder (KOB) decomposition method. We find that the project has a positive impact on agricultural productivity, but the impact is higher for non-minority and male-headed households than for minority and female-headed households, respectively. The ethnicity productivity gap is smaller in the treatment group than in comparison group. Even though male-headed households have consistently higher productivity, the gender gap in agricultural productivity is smaller in the treatment group compared to the comparison group. KOB decomposition shows that the ethnicity- and gender- specific differential impacts are mainly driven by differential endowment effects, primarily land and labor endowments. Results suggest that the project reduced the ethnicity- and gender-specific productivity gaps, although it did not eliminate them entirely. These findings highlight the need for targeted support to vulnerable producers including ethnic minority and female producers. Specifically targeted land tenure security programs can ensure that vulnerable producers can harness benefits in a manner which could help narrow productivity differences.

Children’s endowment effect is impacted by the salience of the object, but not the duration of possession or the object’s tangibility

The endowment effect describes a bias in which individuals value an object more at the moment of possession than they did prior. This bias does not appear consistently, however, and one hypothesis, supported by work in both adults and non-human primates, suggests that an items’ utility increases the magnitude of effect. We tested three hypotheses to explore factors underlying the effect in 3–8 year old children. Children showed a stronger effect for toys, which have utility to children, than for “useless” objects (cabinet hardware). However, they showed no increased effect for active over passive possession, or when they possessed it for longer, nor for the actual object compared to an image or symbol representing it. We also found a stronger effect among older than younger children. We consider what these results mean for understanding the origins and expression of the endowment effect.

Heterogeneity in the WTA-WTP disparity for irrigation water reliability

This paper assesses the WTP and WTA for improvements and deteriorations, respectively, in irrigation water supply reliability. The assessment relies on a double-sided discrete choice experiment valuation using latent-class modeling accounting for preference and scale heterogeneity. This valuation approach is empirically implemented using a case study of a Spanish irrigated district significantly impacted by climate change. The results obtained show individual-specific preference heterogeneity in the WTA-WTP disparity, primarily driven by the different impacts of water reliability on farmers' utility (changes in business revenues and costs, uncertainty in business performance, and farm income effects) and interindividual differences in loss aversion (different degrees of endowment effect). Additionally, the significant scale heterogeneity and ordering effects found suggest that it may be advisable to use modeling approaches that account for them. Several policy-relevant implications can be drawn, including the non-neutrality of the initial allocation of property rights, repercussions on the cost-benefit of climate change adaptation measures, and the need to account for irrigators’ preference heterogeneity in order to design successful market-based instruments.

How do free-play offers affect gambling behavior?

PurposeThis study aims to understand how free-play credits affect risk-seeking behavior in slot players. Extant results suggest they encourage risk aversion, counter to the primary aim of increasing spend per visit. The results inform operators as to the effectiveness of what has become the primary play incentive for casino marketers within many of the world’s markets.Design/methodology/approachWithin a quasi-experimental grouped design, 365 days of player-level performance data from four different casinos were analyzed to determine whether player losses (casino revenues) and time played differed on visits that included free-play redemptions from those that did not. Hypotheses were tested via paired-samples t-tests and Mann–Whitney U tests.FindingsOn balance, neither player losses nor time played were significantly different on the free-play visits. Neither the house money effect nor the endowment effect was supported. The results were most consistent with the prospect-theory-with-memory editing rule. No findings indicated increased risk-seeking behavior associated with the free-play offers.Practical implicationsCasino operators are afforded insight related to how costly free-play campaigns affect gaming spend and playtime. Both are critical to understanding the impact of free-play on the gambler’s experience.Originality/valueThe 365-day samples extended existing research by analyzing the impact of free-play offers on risk-taking behaviors within the scope of a perpetual/ongoing campaign. Comparisons of observed daily behavior/outcomes were made between separate tiers of like-kind gamblers from each of four different casinos. Quasi-hedonic editing rules were applied to a multistage decision framework.

Homo indifferencus: Effects of unavailable options on preference construction

AbstractPeople want what they cannot have. Yet would people still covet a forgone option when they have no initial preference for it? We examined this question in two parts by identifying five unique types of choice indifference and testing what choices people make when they have “no preference” for receiving an endowed good that subsequently becomes unavailable. First, we found that feeling indifferent among options is a common response to making decisions; furthermore, we found that previously established effects are significantly altered when accounting for participants' indifference. Second, when people experience the loss of a would‐be endowed option, we found that they replace it with a similar option, to such an extent that they choose an option that is inferior to other available options. Together, our results demonstrate that the classic endowment effect does not only emerge after people are endowed but beforehand. That is, when people expect to be endowed with a good, they behave like it is already theirs and replace its loss with a similar good even when (1) they are initially indifferent to it and (2) they could choose something better.

Analysis of the Strategic Decision-Making Behaviour of Entrepreneurs from a Behavioural Economics Perspective

In recent years, behavioural economics has gradually entered the public domain. It attempts to incorporate human behaviour, psychology and cognitive knowledge into economic analysis and theory. Therefore, to a certain extent, behavioural economics also influences entrepreneurs' strategic decisions. In this paper, we will illustrate how behavioural economics can influence the behaviour of entrepreneurs through the reference dependence, endowment effects and mental accounting in behavioural economics theory. The paper also incorporates the case of Taobao to argue that the right decision making behaviour is one of the key factors for the success of a firm. In addition, the paper discusses the reasons behind the strategic decision making behaviour of entrepreneurs through heuristic techniques and prospect theory in behavioural economics. In the conclusion, the paper shows how entrepreneurs can make the right decisions through behavioural economics theory. It also briefly explains the evolution of the direction of economics research and where it is headed in the future.

Examining the impact of major life events on the frequency and experience of daily social events.

Life events can impact people's dispositional functioning by changing their state-level patterns of thoughts, feelings, and behavior. One pathway through which this change may be facilitated is changes in the experience of daily social events. We examined the dynamic relationship between major life events and the subsequent experience of positive and negative daily social events in a year-long longitudinal study (initial N=1247). Experiencing positive and negative major life events moderated the effects of positive and negative social events on event-contingent state well-being and ill-being in ways that were mostly (but not always) consistent with both endowment and contrast effects on judgments of well-being. Furthermore, negative life events predicted an increase in the subsequent trajectory of negative social events, while the experience of daily ill-being predicted the subsequent experience of negative social events. These findings highlight the possible impact of major life events by explaining how they shape the subsequent experience of daily social events.

Behavioral Finance: A Study of Literature

The basic objective of this paper is to introduce the definition of different psychological biases that included in behavioural finance, find out the reasons why people behave differently in real life financial market from what is understood by traditional finance, elaborate the meaning of apply behavioural finance in people’s daily life, explain the importance of behavioural finance to modern economics. According to different experiments in previous research papers include mug test, caterpillar effect and several famous tests to explain four different categories of behavioural finance which are framing effect, loss aversion, endowment effect and herd instinct. In each categories described the definition, to connect the behaviour with human habits and give the examples to explain the reason of this psychological biases relate to the real financial market. This paper also includes the analysis of the impact of behavioural finance on human decision-making process and the future prospects of behavioural finance to explain and excavate the future research direction, identify drawbacks in current research content.

Emotional Biases and Equity Investment Decision of Individual Investors

Emotional bias is the presentation of felling of the people about acting something. It affects the human behavior which ultimately influence the decision-making behavior of the individual investors. This study focuses on examining the influence of emotional biases on equity investment decision of individual investors. This study was based on quantitative approach of research with the sample size of 385 individual investors. However, the response rate of the study was 79% while the usable response was only 68.31% of the sample. Emotional biases are measured by loss aversion bias, overconfidence bias, endowment bias, self-control bias, regret aversion bias and status quo bias. Evidence indicates that loss aversion bias, overconfidence bias, self-control bias and regret aversion bias had significant positive influence on equity investment decision. However, endowment bias and status quo bias had no significant contribution to the equity investment decision of the individual investors in Chitwan. Hence, the equity investment decision of investors in Chitwan is broadly depend upon easily and readily available information and strongly based on their own beliefs and emotions without resorting to deep research, investigation, information processing and analysis of the securities and the market with fundamental and technical analysis that leads to overtrading and overreaction to the market, holding on too losing stock enormously, holdings on to enormous risky portfolios, selling off gaining portfolio to early and finally, making investment decisions without proper analysis of the information, decisions are based on their own moods, beliefs, emotions, past experience and stock of knowledge.

Neural correlates of overvaluation and the effort to save possessions in a novel decision task: An exploratory fMRI study.

People exhibit a strong attachment to possessions, observed in behavioral economics through loss aversion using new items in the Endowment or IKEA effects and in clinical psychology through pathological trouble discarding domestic items in Hoarding Disorder. These fields rarely intersect, but both document a reticence to relinquish a possessed item, even at a cost, which is associated with feelings of loss but can include enhanced positive states as well. To demonstrate the shared properties of these loss-related ownership effects, we developed the Pretzel Decorating Task (PDT), which concurrently measures overvaluation of one's own over others' items and feelings of loss associated with losing a possession, alongside enhanced positive appraisals of one's items and an effort to save them. The PDT was piloted with 31 participants who decorated pretzels and responded to their own or others' items during functional neuroimaging (fMRI). Participants observed one item per trial (self or other) and could work to save it (high or low probability loss) before learning the fate of the item (trashed or saved). Finally, participants rated items and completed hoarding tendency scales. The hypotheses were supported, as even non-clinical participants overvalued, viewed as nicer, feared losing, and worked harder to save their items over others'-a response that correlated with hoarding tendencies and motor-motivational brain activation. Our region of interest in the nucleus accumbens (NAcc) was engaged when viewing one's own items to the extent that people worked harder to save them and was more active when their items were saved when they felt emotionally attached to possessions in real life. When their items were trashed, NAcc activity negatively correlated with trouble discarding and emotional attachments to possessions. Right anterior insula was more active when working to save one's own over others' items. Extensive motor-motivational areas were engaged when working to save one's own over others' items, including cerebellum, primary motor and somatosensory regions, and retrosplenial/parahippocampal regions-even after controlling for tapping. Our attachments to items are emotional, continuous across typical and pathological populations, and drive us to save possessions that we value.

Expected subjective value theory (ESVT): A representation of decision under risk and certainty

We present a descriptive model of choice derived from neuroscientific models of efficient value representation in the brain. Our basic model, a special case of Expected Utility Theory, can capture a number of behaviors predicted by Prospect Theory. It achieves this with only two parameters: a time-indexed “payoff expectation” (reference point) and a free parameter we call “predisposition”. A simple extension of the model outside the domain of Expected Utility also captures the Allais Paradox. Our models shed new light on the computational origins and evolution of risk attitudes and aversion to outcomes below reward expectation (reference point). It delivers novel explanations of the endowment effect, the observed heterogeneity in probability weighting functions, and the Allais Paradox, all with fewer parameters and higher descriptive accuracy than Prospect Theory.