Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities
The endowment effect has gained dominance over the decades due to its ability to explain behavioral instincts portrayed by individuals when making decisions and its inconsistency with standard economic theories. It has been extensively applied in different fields of study, however its applicability...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Sciendo
2024-03-01
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| Series: | Real Estate Management and Valuation |
| Subjects: | |
| Online Access: | https://doi.org/10.2478/remav-2024-0004 |
| _version_ | 1797266094305574912 |
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| author | Mwanyepedza Robert Mishi Syden |
| author_facet | Mwanyepedza Robert Mishi Syden |
| author_sort | Mwanyepedza Robert |
| collection | DOAJ |
| description | The endowment effect has gained dominance over the decades due to its ability to explain behavioral instincts portrayed by individuals when making decisions and its inconsistency with standard economic theories. It has been extensively applied in different fields of study, however its applicability to the housing market has been limited since its establishment. The study seeks to investigate whether the endowment effect exists in the housing market and whether the disclosure of information, increased affordability and agent evaluation significantly reduce the endowment effect. Using data obtained from a survey conducted between January and August 2022 in the Eastern Cape Province of South Africa, the study found that the disclosure of information eliminates the gap between buyers’ valuations and market values, while the gap between sellers’ valuations and market prices is reduced but not eliminated by information disclosure. The study has further concluded that increased affordability and agent evaluations significantly reduce the endowment effect in the housing market. Therefore, the study recommends that private and public entities should establish laws and regulations which promote the disclosure of information to reduce the gap between the willingness to pay (WTP) and the willingness to accept (WTA) that exists in the market. |
| first_indexed | 2024-04-25T00:55:13Z |
| format | Article |
| id | doaj.art-a54f0b24716b400fa73cc8c6a7cbba86 |
| institution | Directory Open Access Journal |
| issn | 2300-5289 |
| language | English |
| last_indexed | 2024-04-25T00:55:13Z |
| publishDate | 2024-03-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Real Estate Management and Valuation |
| spelling | doaj.art-a54f0b24716b400fa73cc8c6a7cbba862024-03-11T10:06:09ZengSciendoReal Estate Management and Valuation2300-52892024-03-01321374810.2478/remav-2024-0004Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept DisparitiesMwanyepedza Robert0Mishi Syden11Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa1Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South AfricaThe endowment effect has gained dominance over the decades due to its ability to explain behavioral instincts portrayed by individuals when making decisions and its inconsistency with standard economic theories. It has been extensively applied in different fields of study, however its applicability to the housing market has been limited since its establishment. The study seeks to investigate whether the endowment effect exists in the housing market and whether the disclosure of information, increased affordability and agent evaluation significantly reduce the endowment effect. Using data obtained from a survey conducted between January and August 2022 in the Eastern Cape Province of South Africa, the study found that the disclosure of information eliminates the gap between buyers’ valuations and market values, while the gap between sellers’ valuations and market prices is reduced but not eliminated by information disclosure. The study has further concluded that increased affordability and agent evaluations significantly reduce the endowment effect in the housing market. Therefore, the study recommends that private and public entities should establish laws and regulations which promote the disclosure of information to reduce the gap between the willingness to pay (WTP) and the willingness to accept (WTA) that exists in the market.https://doi.org/10.2478/remav-2024-0004endowment effectinformation asymmetryreal estate market decisionsd82d91r32 |
| spellingShingle | Mwanyepedza Robert Mishi Syden Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities Real Estate Management and Valuation endowment effect information asymmetry real estate market decisions d82 d91 r32 |
| title | Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities |
| title_full | Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities |
| title_fullStr | Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities |
| title_full_unstemmed | Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities |
| title_short | Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities |
| title_sort | endowment effect information asymmetry and real estate market decisions willingness to pay and willingness to accept disparities |
| topic | endowment effect information asymmetry real estate market decisions d82 d91 r32 |
| url | https://doi.org/10.2478/remav-2024-0004 |
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