The Endowment Effect: High stakes evidence from rural Zambia

Last registered on October 22, 2024

Pre-Trial

Trial Information

General Information

Title
The Endowment Effect: High stakes evidence from rural Zambia
RCT ID
AEARCTR-0001111
Initial registration date
September 28, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
September 30, 2019, 1:37 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
October 22, 2024, 3:30 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Primary Investigator

Affiliation
UC Santa Barbara

Other Primary Investigator(s)

PI Affiliation
UC Santa Barbara
PI Affiliation
University of Heidelberg
PI Affiliation
Swiss Tropical and Public Health Institute & University of Basel

Additional Trial Information

Status
Completed
Start date
2014-10-07
End date
2015-09-15
Secondary IDs
Prior work
This trial is based on or builds upon one or more prior RCTs.
Abstract
A growing literature associates poverty with biases in decision-making. We investigate this link in a sample of over 3,000 small-scale farmers in Zambia, who participated in a series of experiments involving the opportunity to exchange randomly assigned household items for alternative items of similar value. Exploring a total of 5,842 trading decisions over a range of household items we show that exchange asymmetries are sizable and remarkably robust across items and experimental procedures. Using cross sectional, seasonal and randomized variation in financial resource availability, we show that exchange asymmetries decrease in magnitude when subjects are more constrained. Consistent with the interpretation that financial constraints increase decision stakes, we also show that trading probabilities increase when the value of the items involved is exogenously increased.
External Link(s)

Registration Citation

Citation
Fehr, Dietmar et al. 2024. "The Endowment Effect: High stakes evidence from rural Zambia." AEA RCT Registry. October 22. https://doi.org/10.1257/rct.1111-2.0
Experimental Details

Interventions

Intervention(s)
We collect data in the context of an ongoing randomized controlled trial on seasonal resource constraints and labor supply that involved repeated surveys over multiple years (see Fink, Jack, and Masiye, 2018). As part of the ongoing surveys, households received a small item as a compensation for their time. We intervened in this standard procedure by randomly endowing participants with one of two equally-valued items midway through a survey. Items were common household necessities worth about 1/5th of the daily agricultural wage. At the end of the survey, surveyors offered participants the opportunity to trade the endowed item for the alternative item. This implements the standard exchange paradigm used to measure the "endowment effect" in laboratory settings in a more naturalistic, real-stakes decision in the field.
Intervention (Hidden)
Intervention Start Date
2014-10-07
Intervention End Date
2015-09-15

Primary Outcomes

Primary Outcomes (end points)
trading decisions
Primary Outcomes (explanation)
we record whether a respondent exchanges the item they received initially for an alternative item

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Trading decisions were measured over three survey rounds, implemented after the 2014 harvest, before the 2015 harvest (during the hungry season) and after the 2015 harvest, with random variation in respondent experience in each round. Item pairs and experimental procedures were varied at the village and household level, respectively, into the following conditions:
A) Item pairs:
i) Boom (washing powder) versus Salt
ii) Boom versus cash
iii) Cup versus spoon
iv) Solar lamp versus cash

B) Experimental procedures:
i) Free Choice (no initial assignment)
ii) Assigned (by computer)
iii) Lottery (transparent randomization)
iv) Timing (~5 min interval between assignment and trading opportunity)
v) Voucher (initial assignment of voucher instead of item)
vi) Expectations (trading opportunity announced at time of initial endowment)
vii) Wording (surveyor requested respondent to trade)
Experimental Design Details
Randomization Method
i) assignment of initial item:
standard assignment: computer
lottery: draw button from a bag

ii) assignment of item pairs and experimental procedures:
block randomized across rounds and treatments by computer
Randomization Unit
Village level (item pairs) and household level (experimental procedures)
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
175 villages
Sample size: planned number of observations
5842 choice or trading decisions across 3059 households
Sample size (or number of clusters) by treatment arms
3059 households that make up to three decisions each
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
Harvard School of Public Health Institutional Review Board
IRB Approval Date
2013-10-15
IRB Approval Number
13-1832

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
September 15, 2015, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
September 15, 2015, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
3,059 households across 175 village
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
5,842 individual decisions
Final Sample Size (or Number of Clusters) by Treatment Arms
5,842 individual decisions
Data Publication

Data Publication

Is public data available?
Yes

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Program Files

Program Files
Yes
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
We investigate the link between poverty and decision-making in a sample of farmers in Zambia, who were given the opportunity to exchange randomly assigned household items for alternative items of similar value. Analyzing a total of 5,842 trading decisions and leveraging multiple sources of variation in financial constraints, we show that exchange asymmetries decrease in magnitude when participants are more constrained. This result is robust to experimental procedures and is not mediated by changes in cognitive performance. Consistent with the interpretation that scarcity leads to more rational decisions by increasing the utility loss from forgone trading, we show that trading probabilities go up when the market value of the items is exogenously increased.
Citation
Poor and Rational: Decision-Making under Scarcity Dietmar Fehr, Günther Fink, and B. Kelsey Jack Journal of Political Economy 2022 130:11, 2862-2897

Reports & Other Materials