Topic: BusinessDecision Making

Last updated: March 12, 2019

Several research and proposals regarding endowment effect been done over the years since 1985 by economists. It has been found that human decision making is based on the goods which are already in their possession. It was also found that the pain humans experience in giving up the good in their possession supersedes the experience of acquiring the new or identical product. In other words, this tendency can be referred to as “To have and To Hold.

” Therefore, this is not the first research on the endowment-effect study. Previous authors had identified that this huge difference between WTP and WTA might be reduced or rather disappear depending on the goods features. The paper mainly analyses the circumstances under which the relevant theories affect the exchange asymmetries. The main contribution is thus to provide evidence that endowment effect can also be observed in financially-framed trading platforms which had been ignored by the previous authors. Even though this paper tends to provide a theoretical model to aid the understanding of endowment effect, it does not plainly, or direct express the concern fully. Hence, it provides an implicit theoretical model.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

There are better theories that the authors ought to have incorporated in their research to make it more appealing. For example, theoretical literature that reveals an indication that the margin should differ for the bids and asks were supposed to be used. Once the theory above is ignored, the result produced from the study is likely to deviate from or rather incline towards a specific angle.

The study analyses the effect of the physical endowment on trading behavior of participants. Average bid/buy prices; trading volume and average ask/sell prices can affect the WTA of the participants in the financial context. Thus to obtain clear results for this study, the data collected are suitable to the questions in place. Some of the unique features of the data included in the study are balanced data set for every participant’s trading prices. The dependent average bid/buy price is measured by a specific subject per specific time frame. The averages ask/sell price is obtained through derivative from other related data sources.

The study further stresses that only the elicit subjects with relevant information are entered in the regression for analysis. The authors of the paper correctly specified the empirical model in the study. The responses were not treated as independent due changes of fundamental values. The results of the research paper show that the existence of physical currency endowments depresses or lowers the averages bid/buy prices but not ask/sell prices. This paper and its findings support a context-specific of the endowment effect in reading or literature.

The authors, however, did not exhaust the study; they ought to have carried an additional study to enhance the understanding of type-specific behavioral patterns, their effect on market aftermaths in a detailed manner. Data presented for this study are well tabulated, and coefficient(s) of interest are well interpreted. For instance, the paper has clearly stated and defined the regression equation, containing the coefficients such as the bid/buy price, ask/sell price, trading volume, conversion rate and the indices t and i that refer to periods and subjects respectively. The paper has also defined the regression coefficients, which helps understand the experimental evidence. Quality of the work is also appreciated since it especially addresses its objective and suggests area(s) for further research.


I'm Piter!

Would you like to get a custom essay? How about receiving a customized one?

Check it out