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The Endowment Effect: High stakes evidence from rural Zambia

Last registered on September 30, 2019

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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

Last updated

September 30, 2019 1:37 PM EDT

Location(s)

Country

Zambia

Region

Chipata District, Eastern Province

Primary Investigator

Name

Kelsey Jack

Affiliation

UC Santa Barbara

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Other Primary Investigator(s)

PI Name

Günther Fink

PI Affiliation

Swiss Tropical and Public Health Institute & University of Basel

Contact Investigator

PI Name

Dietmar Fehr

PI Affiliation

University of Heidelberg

Contact Investigator

PI Name

B. Kelsey Jack

PI Affiliation

UC Santa Barbara

Contact Investigator

Additional Trial Information

Status

Completed

Start date

2014-10-07

End date

2015-09-15

Keywords

Other

Additional Keywords

poverty, decision bias, endowment effect, seasonality

JEL code(s)

Secondary IDs

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. 2019. "The Endowment Effect: High stakes evidence from rural Zambia." AEA RCT Registry. September 30. https://doi.org/10.1257/rct.1111-1.0.

Sponsors & Partners

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 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

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?

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)

Supporting Documents and Materials