Analysis Of Non-Physical Money From The Endowment Effect Perspective

Abstract

A B S T R A C T With the advancement of technology, almost all countries have started to evaluate policies for switching to non-physical currency, especially digital money. As a matter of fact, the application of non-physical (digital) money has been taken further and started to be implemented as a pilot by China, Sweden, Thailand, Ukraine, Uruguay and South Korea. In the age we live in, it seems inevitable that money will sooner or later turn into a non-physical form. In this context, the effect of non-physical money on individuals' spending tendency in the short term reveals its importance. Thus, the study provides insight for policy makers in case a non-physical money application such as digital money is adopted in the future. In this context, the effect of non-physical money on spending behavior was analyzed from a behavioral economic perspective with an experimental study specific to the endowment effect. The experiment applied in the study was carried out entirely on a voluntary basis. Care was taken to protect privacy during the application. All instructions to the participants were communicated clearly and understandably. Participants were made comfortable during the experiment. In addition, it was made possible to establish the internal and external validity required in the experimental study. Any manipulation of participants was prevented. In this context, data were collected in the study by observing the tendency to spend physical money and non-physical money given to a group of 26 subjects. Afterwards, the analysis was carried out by comparing the spending tendencies of both groups. As a result of the study, it was determined that the group with physical money tended to spend less due to the ownership effect compared to the group without physical money. In parallel with the ownership effect, it has been evaluated that the reason why the group with physical money tends to spend it late may be due to the pain of paying money.