Normality rather than anomaly: The theory and application of endowment effect

Li, Haihong; Zhou, Dejian; He, Xin; Shen, Shaojing; Zou, Yawen; Zhu, Minfan; Wang, Yun; Xie, Xiaofei

doi:10.3724/sp.j.1042.2019.00394

Cited by 2 publications

(1 citation statement)

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“…In the barter paradigm, a subject is randomly assigned to an item the owner is reluctant to exchange [8]. In the valuation paradigm, a subject is randomly assigned to be either a buyer or a seller, suggesting that the minimum price for a seller who is willing to accept to sell an item (willingness to accept, WTA) is significantly higher than the maximum price that a buyer is willing to pay for the item (willingness to pay, WTP) [9][10][11]. The "endowment effect" phenomenon, that is, that WTA is always larger than WTP, was first proposed by Thaler in 1980 [12].…”

Section: Introductionmentioning

confidence: 99%

Measurement of Supply-and Demand-Side Endowment Effects and Analysis of Their Influencing Factors in Agricultural Land Transfer

Zhang

Shen

et al. 2022

Land

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For a long time, the transference of land-contracting management rights was hindered by the unwillingness of farmers and inefficient use of farmland. The endowment effect is prevalent for farmers and is the main reason for the inhibited flow of farmland. However, recent studies have evaluated the endowment effect by treating buyers and sellers as one subject, which cannot be applied to individual land transfer transactions. Therefore, this paper redefines the endowment effect of farmland management rights by introducing market price as a reference point to evaluate the level of the supply- and demand-side endowment effects. The supply-side endowment effect is the gap between sellers’ willingness to accept and the market rent; the demand-side endowment effect is the gap between the market rent and buyers’ willingness to pay. In the empirical study, two multiple regression models are designed to measure the respective factors affecting the supply and demand sides, employing farm household survey data in Shaanxi Province. The obtained results reveal that the agricultural land transfer in Shaanxi Province is at a normal proportional level, and the supply- and demand-side endowment effects in agricultural land transfer are prevalent. The dependence of people on goods and the substitutability of the goods significantly affect the endowment effect of supply-side farmers, while the perception of expected income, cost and risk impact the endowment effect of demand-side farmers. Based on this, some policy recommendations are proposed to offset the influence of the endowment effect, thus promoting the development of the farmland transfer market.

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