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

Author

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  • Gine,Xavier
  • Goldberg,Jessica Ann

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.

Suggested Citation

  • Gine,Xavier & Goldberg,Jessica Ann, 2018. "Endowment Effects and Usage of Financial Products : Field Evidence from Malawi," Policy Research Working Paper Series 8576, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8576
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    Cited by:

    1. Spantig, Lisa, 2021. "Cash in hand and savings decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1206-1220.

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