Experimental Design Details
In a first session, we will elicit participants’ willingness to pay for a list of agricultural and household items using the Becker-DeGroot-Marschak (BDM) method. For each respondent, we will identify three of these items that they value similarly. Out of these three, one item will be randomly selected to be given to the respondent for free. Then, after several days, the respondent will return for a second session. In this session, we will elicit willingness to pay (again using BDM) for the remaining two items using a loan. One of the items will be paid for using a SACL, with the item endowed in the first session as collateral, while the other item will be paid for using a NACL, with the new item being purchased itself as collateral. Random assignment of which item is initially endowed, which is for sale using a SACL, and which is for sale using a NACL ensures that the average willingness to pay for the assets being purchased and used as collateral is the same in the SACL and the NACL, such that any systematic difference between willingness to pay for the two loans can be attributed to the endowment effect.
In the first session, before respondents are endowed with any item, we elicit predictions of future willingness to pay for items using a SACL and a NACL. This allows us to determine whether respondents who are subject to an endowment effect are sophisticated about how such an effect will influence their future loan take-up decisions. However, this survey module will only be completed by a randomly selected subset of all respondents. Randomizing whether respondents are asked to make these predictions will allow us to measure the extent to which having to predict future decisions influences actual future decisions. If the loan prediction module does influence responses in the later loan take-up module, having a group of respondents who did not make these predictions allows us to measure loan demand without such a prediction effect. For a randomly selected half of the respondents who participate in this module, we will offer a small incentive for accurate predictions.
Additionally, to estimate the magnitude of the endowment effect over the initially endowed item, we will elicit willingness to accept for the endowed item during the second session, after respondents have owned the item for several days. A difference between willingness to pay for the item in the first session and willingness to accept for the item in the second session indicates that the respondent experiences an endowment effect over the item. Again, we measure sophistication over such an effect by eliciting predictions in the first session, before the item is endowed, of future willingness to accept in the second session. Again, these predictions will be incentivized for a randomly selected half of respondents, as in the loan willingness to pay predictions.
Finally, we measure individual-level loss aversion, which may drive the endowment effect, by asking respondent to accept or reject a series of six small-stakes gain-loss lotteries with varying (positive) expected value. We then select one of the six lotteries at random, and implement that lottery if the respondent previously chose to accept it.