Decision making in the pre-development stage of residential development | |
| Author | Satakhun Kosavinta |
| Call Number | AIT Diss. no.SM-17-05 |
| Subject(s) | Housing development Housing--Decision making Real estate development--Decision-making |
| Note | A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Management |
| Publisher | Asian Institute of Technology |
| Abstract | The purpose of this study is to investigate the rationality of residential developers’ decision making in Thailand. Exploring its implications in the residential development field, the author proposes the famous prospect theory as the primary cause of developers’ incompetent decisions during the pre-development stage of residential development. The methodology used in this research is called the three-pronged approach, which includes a literature review, expert interviews, and experimental questionnaire. This research is among the first to empirically confirm that prospect theory dominates the decisions of residential developersto invest. It reveals the existence of the unproven prospect theory in the residential development field using an empirical study in Thailand as a case study. This study focuses on residential developers, who are typically the first to become involved in the development process besides the initiators. The results of the structural equation modeling (SEM) show that Thai developers exhibit all five aspects of prospect theory: loss aversion, fourfold pattern, bias from rare events, mental accounting, and preference reversals; however, in contrast to previous literature, for the fourfold pattern, Thai developers always choose to receive gains and usually make risky choices to avoid losses, even if the risk of loss is low. Moreover, status quo bias has a low influence on Thai developers; they tend to become attached to the areas they develop but remain flexible in selecting a project type that fits the land. In addition, preference reversals and the framing effect only affect some groups of developers. According to the expert interviews, both aspects do not affect the preferences of Thai developers with significant experience. Conversely, conforming to previous literature, Thai developers exhibit the endowment effect, which means when one possesses something, they value that item more than its true value. Bias from rare events (experience-based decision-making) causes the under weighting of rare events. Thai developers underestimate long-time rare events that they consider to be an experience, but they overrate rare events that are vivid and compelling in their mind. Mental accounting causes developers to isolate their projects and to make decisions on only one project at a time, which can blind them to potential risks and investment opportunities. Therefore, in terms of academic contribution, this research introduces applications of prospect theory into the field of residential development research. The research also establishes an initial model of developers’ decision-making to develop a decision model. Regarding its managerial contribution, this research can provide guidelines for Thai residential developers, whether in the public or private sector, to enhance their knowledge and ability to anticipate the psychological obstructions that can arise in small- and medium scale residential development projects; it may also be further generalized to other countrie |
| Year | 2017 |
| Type | Dissertation |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Doctor of Philosophy in Management (Publication code = SM) |
| Chairperson(s) | Donyaprueth Krairit |
| Examination Committee(s) | Do Ba Khang;Vatcharaporn Esichaikul; |
| Scholarship Donor(s) | Royal Thai Government Fellowship; |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 2017 |