The endowment effect and housing studies: the role of multiple reference points

• Authors: Mateusz Tomal
• Languages of publication: EN

Abstracts

EN

One of the most researched and proven behavioural biases is the endowment effect, which manifests in people''s higher valuation of goods they own relative to goods they do not. Loss aversion is considered the main cause of the endowment effect because of the assumption that losses loom larger than gains. Whether decisions are framed as either gains or losses depends on the adopted reference point, which is usually taken as current ownership. Mainstream behavioural economics also postulates that the decision-making process involves multiple reference points. This study aims to provide new arguments in favour of the existence of multiple reference points affecting the formation of the endowment effect based on theoretical reflections and empirical evidence from the housing market. A critical review of the literature, as well as an empirical study, revealed that there are multiple reference points in the housing market, the interaction between which leads to the endowment effect.

Keywords

EN

endowment effect; multiple reference points; housing market; housing economics; home ownership

Discipline

• SOCIOLOGY: SOCIOLOGY

• Publisher: Institute of Sociology, Czech Academy of Sciences
• Journal: Critical Housing Analysis
• Year: 2024
• Volume: 11
• Issue: 2
• Pages: 184-193
• Document type: ARTICLE

Contributors

author

Mateusz Tomal

• Critical Housing Analysis, redakce,Sociologický ústav AV ČR, v. v. i. Jilská 1, 110 00 Praha 1, Czech Republic