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<p>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.</p>
</abstract>

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.

Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities

Department of Economics, Faculty of Business and Economic Sciences

Real Estate Management and Valuation

This work is licensed under the Creative Commons Attribution 4.0 International License.

The endowment effect has gained dominance over the decades due to its ability to explain behavioral instincts portrayed by individuals when making decisions...

Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities

Published Online: Mar 06, 2024

Page range: 37 - 48

Received: May 28, 2023

Accepted: Aug 25, 2023

DOI: https://doi.org/10.2478/remav-2024-0004

Keywords
endowment effect, information asymmetry, real estate market decisions

© 2024 Robert Mwanyepedza et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Endowment Effect, Information Asymmetry, and Real Estate Market Decisions: Willingness to Pay and Willingness to Accept Disparities

Published Online: Mar 06, 2024

Page range: 37 - 48

Received: May 28, 2023

Accepted: Aug 25, 2023

DOI: https://doi.org/10.2478/remav-2024-0004

Keywordsendowment effect, information asymmetry, real estate market decisions

© 2024 Robert Mwanyepedza et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
endowment effect, information asymmetry, real estate market decisions