Endowment Effects and Usage of Financial Products: Field Evidence from Malawi

31 Pages Posted: 17 Sep 2018

See all articles by Xavier Giné

Xavier Giné

World Bank - Development Research Group (DECRG)

Jessica Goldberg

University of Maryland, Department of Economics

Date Written: September 5, 2018

Abstract

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.

Keywords: International Trade and Trade Rules, Educational Sciences, Urban Governance and Management, Urban Housing and Land Settlements, Urban Housing, Municipal Management and Reform, Transport Services, Banks & Banking Reform

Suggested Citation

Gine, Xavier and Goldberg, Jessica, Endowment Effects and Usage of Financial Products: Field Evidence from Malawi (September 5, 2018). World Bank Policy Research Working Paper No. 8576. Available at SSRN: https://ssrn.com/abstract=3246148

Xavier Gine (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Jessica Goldberg

University of Maryland, Department of Economics ( email )

College Park, MD 20742
United States

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