How does stakeholder loss aversion affect the promotion of green housing?

Qianwen Li, Tingyu Qian, Xufeng Zhang, Ruyin Long, Hong Chen, Han Huang, Lei Liu, Licai Zhu, Huikang Jiang and Hanyi Zhu

Economic Analysis and Policy, 2023, vol. 80, issue C, 647-668

Abstract: Incorporating the principles of loss aversion psychology within the context of green housing stakeholders – the government, realtors, and residents – this study extends its purview into an evolutionary game model. This model takes into account the consequences of inaction in the absence of government oversight, the additional loss incurred by realtors due to the unmarketable development of green housing, and the psychological loss experienced by residents when their green housing acquisitions fall short of their expectations. To further enrich our analysis, three distinct scenarios are considered for the government: exclusive rewards without penalties, exclusive penalties without rewards, and a combination of both rewards and penalties. The simulation results show that: (1) The initial probability values assigned to the three parties do not significantly impact the long-term stable equilibrium. Interestingly, a higher initial probability value tends to steer all three parties towards selecting the stable equilibrium solution. (2) Within the context of the three reward–penalty​ scenarios, it becomes evident that an increase in the magnitude of government rewards and penalties inclines realtors towards a greater inclination to engage in green housing development. Nonetheless, a balanced approach appears to yield the most favorable results. (3) A sensitivity analysis reveals that a heightened aversion to loss within the government’s decision-making process leads to a higher likelihood of regulatory intervention. Conversely, a diminished loss aversion mindset among realtors and residents correlates with an increased propensity for realtors to invest in green housing development, while residents are more inclined to purchase green housing. Finally, corresponding policy implications are given according to the conclusions.

Keywords: Green housing; Loss aversion; Evolutionary game; Reward and penalty (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:80:y:2023:i:c:p:647-668

DOI: 10.1016/j.eap.2023.09.015

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