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Decision making in the pre-development stage of residential development

Author

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  • Satakhun Kosavinta
  • Donyaprueth Krairit
  • Do Ba Khang

Abstract

Purpose - The purpose of this paper is to investigate the rationality of the decision making of residential developers in Thailand. Exploring its implications in the residential development field, the researchers propose the famous prospect theory as the primary cause of developers’ incompetent decisions during the pre-development stage of residential development. Design/methodology/approach - The methodologies used in this research include literature review, expert interview, and experimental questionnaire. Findings - The results show that Thai developers exhibit all five aspects of prospect theory: loss aversion, fourfold pattern, bias from rare events, mental accounting, and preference reversals (PR); however, in contrast to previous literature, the researchers found that 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, PR and the framing effect affect only some groups of developers. Practical implications - This research provides awareness to professionals in the residential development field to make sound judgements, using Thailand as a case study. Originality/value - This paper reveals the existence of the unproven prospect theory in the residential development field using an empirical study in Thailand as a case study.

Suggested Citation

  • Satakhun Kosavinta & Donyaprueth Krairit & Do Ba Khang, 2017. "Decision making in the pre-development stage of residential development," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 35(2), pages 160-183, March.
    • Handle: RePEc:eme:jpifpp:jpif-05-2016-0030
    DOI: 10.1108/JPIF-05-2016-0030
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