Private Ownership of a Cultural Event: Do Attendees Perceive it as a Risky Lottery? 

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Nudges and policy making

Understanding the reasons for people s behaviour is vital for policy making. People often behave short-sighted when it comes to environment protection as they tend to underestimate the future benefits of today s good habit. A growing literature on behavioural economics and psychology suggests the use of non-price interventions nudges . A nudge is a helping hand that will lead someone to make better decisions, both for himself/herself and for the public interest as well (Thaler and Sunstein, 2008). Nudging heavily relies on behavioural economics literature and argues that by changing choice architecture, people can be gently nudged . Taking biases into account when designing policy may be more effective.
Chapter 3 studies whether nudges are efficient in promoting ecological behaviour and recycling of young people, and whether different types of nudges or their combination serve as better instruments for inducing this. The study was performed on primary data, from both a survey and field experiment conducted among university students in Pisa, one of the most important university cities in Italy. The survey was conducted during May and June 2013. The field experiment was conducted over a 60-day span (from October to December 2013). We collected data on 1849 instances of plastic cup recycling at a coffee vending machine at the School of Advanced Studies Sant Anna in Pisa. The users were not aware that they were participants in the study. Recycling behaviour was measured by number of plastic cups disposed in the dustbin, observed at the end of a day. Analysis of the survey data revealed that most of participants would follow indirect non-price interventions. Results of experimental treatments show significant increases in the number of recycled plastic cups. The paper further includes a simple game theoretical model that takes account of the individuals decisions with respect to the variables elaborated above. This model is able to replicate the results and illustrates the effect of a perceptional change (awareness raising) of individuals, a shift in the social norm, as well as a switch in the nudges. Our main contributions are that nudges can be used for inducing green behaviour of young consumers and thereby generate a long lasting effect.

Behavioural approach to property decision making

All over the world over the recent decades there is a strong infatuation towards property markets. Buying a house is probably one of the biggest investments an individual will make. However it seems that psychological and sociological aspects in property decision making are often neglected. Though property markets are rather illiquid, property markets are assumed to be efficient and that participants behave rationally. By the end of the 1980s, studies concluded that property markets are inefficient (e.g., Case and Schiller 1989). Moreover extended research by Case and Schiller (1990) asserts that price changes observed in one year succeed in the following year. Furthermore recent evidence on non-financial motives and behavioural biases in property decision making suggests that research in property markets should go beyond cash flows and start providing space for the psychological side of stakeholders in property markets. What happens in the property markets depends on people s attitudes, beliefs and behaviours.
Chapter 4 studies property price expectations in the UK by conducting an online experiment. We shed light on property price expectations formation and on prominent behavioural explanations of these, in particular optimism and anchoring. This paper contributes to the literature on property markets as it is one of the first investigating property price expectations using an experiment for the both types of properties residential and commercial. Moreover use of forecast horizons enables studying differences between short term, medium term and long term property price expectations. Results of property price expectations both in residential and commercial markets show that participants expect the trend continuation in bullish markets, a price increase in oscillating markets and a price reversal in bearish markets for all the forecast horizons. Participants are much more optimistic about long term property price changes and this is across all the market trends and property types (residential and commercial). Analysis of rational expectations shows that participants had rational expectations in the short term in bullish residential and commercial markets. Similar results for the short term expectations are in Case, Shiller and Thompson (2012). Furthermore in medium term and long term bull markets, and for all forecast horizons in oscillating and bear commercial and residential markets participants had no rational expectations. The major contribution of this study is that the general assertion in the literature that investors either extrapolate past property prices or on the other hand in the standard economics literature that expectations are rational is not captured for all the forecast horizons, property types and market trends.

Determinants of willingness to accept private ownership

During each Festival edition 2007-2009, the question aimed at eliciting WTAPO was: Would you agree if the private sector contributed to manage and finance a popular cultural event, making profits from it? . Despite the public nature of the Festival, we found many attendees willing to accept this possibility, with a positive difference between minor concerts (44%) and the Final Concert (38%), significant at 1%.
Our data show that attendees are able to perceive the different nature of the two sub-events. As anticipated above, the two sub-events of the Festival are characterized by a different degree of attendees perception of their link with local tradition and culture. Indeed, 35% of people attending minor concerts claim they participate in the event because of the traditions it embodies, and 33% in the Final Concert (significant at 10%). Also, Final Concert attendees are more attracted by the opportunity to be together and entertain with many people (44% vs. 31% in minor concerts, significant at 1%). In section 2 we also stated that the Final Concert is characterized by a more uncertain atmosphere in respect to the minor concerts. The analysis of the determinants of WTAPO will show how a higher perceived cultural connotation and/or a more uncertain environment within the cultural event influence attendees perception of the risk of Festival private ownership.
Table 2.4 reports results of the probit regression model we used to predict the outcome of WTAPO. Coefficients refer to the marginal effects of the explanatory variables described in section 2.3.

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Disentangling different social benefits of private ownership

As shown in the previous section, a large part of the Festival attendees (almost 6/10 on average over the three surveyed editions) is not willing to accept a private ownership of the cultural event. During the last of the three analyzed editions (2009), we tried to explore possible conditions likely to moderate the participants unwillingness.
We asked the sub-sample of attendees not willing to accept Festival private ownership (WTAPO = 0) if, under a specific state of the world, they were willing to change their decision. We did it only during the Final Concert (1,000 observations), given that this is the sub-event where WTAPO is significantly lower.
The question eliciting an attendee s WTAPO (see section 2.4.1) was proposed three more times to attendees who previously gave a negative answer, by adding each time one of these three specifications: if quality would increase , if it would lead to public money saving , and if the Festival would disappear in the absence of private firms intervention . Figure 2.1 reports the percentage of attendees interviewed during the 2009 Final Concert switching from WTAPO = 0 to WTAPO = 1 if one of these three states of the world was attached (by the interviewer) to the private ownership.

Short term versus long term

Time horizon for property price expectations and investments is very important and cannot be neglected. For example institutional investors such as pension funds and insurance companies invest in property estates as a part of their long term investment allocation and their long term pricing expectations. This contrasts with short-term investors more focused on short term pricing expectations in a given economic cycle and a potential attractiveness of property estates to other buyers (Geltner et al., 2010).
In this context we investigate whether differences in property price forecasts exist between the short term and the long term. Given significant importance of short term versus long term property price expectations, there are a few studies available on the time horizon and differences in the property price expectations.
Case, Shiller and Thompson (2012) through a survey based study show there is a large difference between the short-term (one year) and the long-term (10 years) residential houses price expectations. Short term expectations data are much more volatile and even in some years of their survey showed a negative expected growth over the next year. On the contrary the ten year expectations data are more optimistic peaking around 2004 and then slowly declining. Along all years and counties in the survey (1988-2011) buyers ten year expectations exceed one year data expectations.
In our study we also investigate the time horizon perspective in the property price expectations. We extend work of Case, Shiller and Thompson (2012) on studying property price expectations. But with a methodological difference as we use experimental method, while on the contrary they use a survey. Case, Shiller and Thompson (2012) investigate the residential house price expectations. In addition to the residential properties price expectations we include commercial properties forecasts in our study as well.

Commercial versus residential

Property is usually described as a medium risk asset. However leverage is used in the vast majority of property transactions and this distorts return and risk of a property investment. Both the residential and commercial property markets are specific as the lack of formal clearing mechanism for property, such as is offered by the equities financial markets, means that on occasion there maybe few or no transactions increasing the perceived risk of transactions.
Usually neighbourhoods will have their own mix of residential and commercial property estates. Single family houses, apartments, condominiums are all kind of residential properties as these are properties that provide residence for individuals and families. The second category of residential property is income producing and is referred as multi-family housing.
Non-residential properties are divided into five major subcategories: commercial, industrial, hotel, recreational and institutional. Commercial property includes both office building and retail space. The same building may contain both the residential and non-residential uses of space and then it is a mixed use development.
According to (Geltner et al., 2010) the fundamental fact about commercial properties is debt financing. The essence of the leverage effect in the commercial property is an investor s expected return (Geltner et al., 2010). Commercial real estate is mostly held by corporations and REITs (Shiller, 2005).
In this context commercial properties price expectations are important to investigate as a commercial property has higher risks especially when the economy is doing poorly. It is expected that expectations in the commercial property markets should be rational as professional investors have greater knowledge and experience than novices. In light of this we might expect forecasters to avoid making systematic prediction errors.
However in academic literature studies empirically have investigated residential property decision making (e.g., loss aversion, anchoring) and not the commercial property market. Also in terms of property price forecasts and expectations, to the best of our knowledge there are no studies investigating either residential or commercial property price expectations.

Table of contents :

1 Introduction
1.1 Behavioural economics and cultural event management
1.2 Nudges and policy making
1.3 Behavioural approach to property decisions making
2 Private Ownership of a Cultural Event: Do Attendees Perceive it as a Risky Lottery? 
2.1 Introduction
2.2 􂀜La Notte della Taranta􂀝 Festival: objective, structure, and ownership
2.3 Research methodology
2.4 Results
2.4.1 Determinants of willingness to accept private ownership
2.4.2 Disentangling different social benefits of private ownership
2.4.3 Disentangling different economic dimensions of private ownership
2.5 Conclusions
3 Nudges Can Affect Students􂀙 Green Behaviour? 􂀓A Field Experiment
3.1 Introduction
3.2 Literature review
3.3 Model
3.4 Methods
3.5 Results
3.6 Discussion and conclusion
3.7 Policy implications
4 Expectation Formation in Property Markets
4.1 Introduction
4.2 Literature review
4.2.1 Theory of expectations
4.2.2 Anchoring bias
4.2.3 Optimism bias
4.2.4 Short term versus long term
4.2.5 Commercial versus residential
4.3 Methodology
4.3.1 Experimental design
4.3.2 Measures
4.4 Results
4.4.1 Residential property market expectations
4.4.2 Commercial property market expectations
4.4.3 Comparison of residential and commercial property market expectations
4.4.4 Forecast errors in residential and commercial property markets
4.5 Discussion
4.6 Conclusion
Appendix data


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