Endowment Effects and Usage of Financial Products Field Evidence from Malawi
When offered a choice between two savings accounts, prior account holders are significantly less likely to switch to a cheaper account, compared with new subjects without a prior account. While 49 percent of account holders retained their original, expensive accounts, none of the new subjects who op...
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| Format: | eBook |
| Language: | English |
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Washington, D.C
The World Bank
2018
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| Series: | World Bank E-Library Archive
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| Collection: | World Bank E-Library Archive - Collection details see MPG.ReNa |
| Summary: | When offered a choice between two savings accounts, prior account holders are significantly less likely to switch to a cheaper account, compared with new subjects without a prior account. While 49 percent of account holders retained their original, expensive accounts, none of the new subjects who opened an account chose the expensive one. This finding is consistent with the "endowment effect." Exploiting previous experimental variation in account usage among prior account holders, the paper finds that the endowment effect disappears among those with higher induced usage. This finding suggests that familiarity with the account can mitigate behavioral anomalies and improve financial decision-making |
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| Physical Description: | 31 pages |