Econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in China

Rita Yi Man Li


Abstract

Entrepreneurs have always born the risk of running their business. They reap a profit in return for their risk taking and work. Housing developers are no different. In many countries, such as Australia, the United Kingdom and the United States, they interpret the tastes of the buyers and provide the dwellings they develop with basic fittings such as floor and wall coverings, bathroom fittings and kitchen cupboards. In mainland China, however, in most of the developments, units or houses are sold without floor or wall coverings, kitchen  or bathroom fittings. What is the motive behind this choice? This paper analyses the factors affecting housing developers’ decisions to provide fittings based on 1701 housing developments in Hangzhou, Chongqing and Hangzhou using a Probit model. The results show that developers build a higher proportion of bare units in mainland China when: 1) there is shortage of housing; 2) land costs are high so that the comparative costs of providing fittings become relatively low.

Keywords

imperfect information, risk, entrepreneur, fittings, Probit model, housing.

Full Text

PDF

References

Baltas, G. and Saridakis, C. (2009) ‗Brand-name effects, segment differences, and product characteristics: an integrated model of the car market', Journal of Product & Brand Management, 18, 143-151

Bechern, S. I. (2008) ‗Asymmetric information in consumer contracts: The Challenge that is yet to be met', American Business Law Journal, 45, 723-774

Berkelaar, A. B., Kouwenberg, R. and Post, T. (2004) ‗Optimal portfolio choice under loss aversion', The Review of Economics and Statistics, 86, 973-987

Blanchflower, D. G. and Oswald, A. J. (1998) ‗What makes an entrepreneur?', Journal of Labor Economics, 16, 26-60

Brue, S. L., Mcconnell, C., R. and Flynn, S. M. (2009) Essentials of Economics, New York, McGraw Hill

Burnett, J. and Bruce, H., R. (2007) ‗New consumers need new brands', Journal of Product & Brand Management, 16, 342-347

Carland, J. W., Hoy, F., Boulton, W. R. and Carland, J. A. C. (1984) ‗Differentiating entrepreneurs from small business owners: A conceptualization', The Academy of Management Review, 9, 354-359

Chen, H. L. (2007) ‗Gray marketing and its impacts on brand equity', Journal of Product and Brand Management, 16, 247-256

Chongqing, S. I. O. (2008) Chongqing Statistical Yearbook 2008 [Online] Available: http://www.cqtj.gov.cn/tjnj/2008/yearbook/indexe.htm [Accessed 30 April 2010].

Das, T. K. and Teng, B. S. (2001) ‗Trust, control, and risk in strategic alliances: An integrated framework', Organization Studies, 22, 251-283

Fellner, G. and Maciejovsky, B. (2007) ‗Risk attitude and market behavior: Evidence from experimental asset markets', Journal of Economic Psychology, 28, 338-350

Granlund, D. and Rudholm, N. (2011) ‗Consumer information and pharmaceutical prices: Theory and evidence', Oxford Bulletin of Economics and Statistics, 73, 230-254

Gujarati, D. N. (2006) Essentials of Econometrics, Boston, McGraw-Hill/Irwin

Gwin, C. R. and Ong, S. E. (2000) ‗Homeowner warranties and building codes', Journal of Property Investment & Finance, 18, 456-472

Hangzhou Soufun (2009) Hangzhou Soufun [Online] Available: http://hz.soufun.com [Accessed 1 May 2010]

Hangzhou Statistics Bureau (2008) Hangzhou Statistical Yearbook [Online] Available: www.hzstats.gov.cn/web/tjnj/nj2008 [Accessed July 2009]

Hawthorne, L. and Birrell, B. (2002) ‗Doctor shortages and their impact on the quality of medical care in Australia', People and Place, 10, 55-67

Horppu, M., Kuivalainen, O., Tarkiainen, A. and Ellonen, H. K. (2008) ‗Online satisfaction, trust and loyalty, and the impact of the offline parent brand', Journal of Product & Brand Management, 17, 403-413

Ingersoll, R. M. and Smith, T. M. (2003) ‗The wrong solution to teacher shortage', Education Leadership, 60, 30-33

Jensen, M. and Drozdenko, R. (2008) ‗The changing price of brand loyalty under perceived time pressure', Journal of Product & Brand Management, 17, 115-120

Jin, X. H. and Doloi, H. (2008) ‗Interpreting risk allocation mechanism in public private-partnership projects: an empirical study in transaction cost economics perspective', Construction Management and Economics, 26, 707-721

Laforet, S. (2011) ‗Brand names on packaging and their impact on purchase preference', Journal of Consumer Behaviour, 10, 18-30

Li, H., Tang, F. F., Huang, L. and Song, F. (2009) ‗A longitudinal study on Australian online DVD pricing', Journal of Product & Brand Management, 18, 60-67

Li, R. Y. M. (2009) ‗Legal regulations, people's perceptions on law and scope of services provided by firms: a study on dwelling developers in Beijing and Hong Kong', The Business Review, Cambridge, 12, 221-226

Li, R. Y. M. (2010) Factors Influencing Developers' Decision to Sell Housing Units With Fittings - Empirical Evidence from China, The University of Hong Kong, Unpublished Ph.D. Thesis

Matzler, K., Kräuter, S. G. and Bidmon, S. (2008) ‗Risk aversion and brand loyalty: the mediating role of brand trust and brand affect', Journal of Product & Brand Management, 17, 154-162

Olson, E. L. (2008) ‗The implications of platform sharing on brand value', Journal of Product & Brand Management, 17, 244-253

Omar, M., Williams, R. L. and Lingelbach, D. (2009) ‗Global brand market-entry strategy to manage corporate reputation', Journal of Product & Brand Management, 18, 177-187

Pitta, D. A. and Franzak, F. J. (2008) ‗Foundations for building share of heart in global brands', Journal of Product & Brand Management, 17, 64-72

Powell, M. and Ansic, D. (1997) ‗Gender differences in risk behaviour in financial decision-making: an experimental analysis', Journal of Economic Psychology, 18, 605-628

Richard, S. F. (1975) ‗Multivariate risk aversion, utility independence and separable utility functions', Management Science, 22, 12-21

Shanghai Soufun (2009) Shanghai Soufun [Online] Available: http://sh.soufun.com/ [Accessed 1 July 2009]

Shanghai Statistics Bureau (2008) Shanghai Statistics Yearbook 2008 [Online] Available: http://www.stats-sh.gov.cn/2004shtj/tjnj/tjnj2008.htm# [Accessed 2 October 2009]

Shannon, R. and Mandhachitara, R. (2008) ‗Causal path modeling of grocery shopping in hypermarkets', Journal of Product & Brand Management, 17, 327-340

Soufun (2009) 104 Cities [Online] Available: http://www.soufun.com/SoufunFamily.htm [Accessed 10 August 2009]

Souiden, N. and Pons, F. (2009) ‗Product recall crisis management: the impact on manufacturer's image, consumer loyalty and purchase intention', Journal of Product & Brand Management, 18, 106-114

Tovar, P. (2009) ‗The effects of loss aversion on trade policy: Theory and evidence', Journal of International Economics, 78, 154-167

Wang, C. X., Webster, S. and Suresh, N. C. (2009) ‗Would a risk-averse newsvendor order less at a higher selling price?', European Journal of Operational Research, 196, 544–553

Wang, Y. P. and Murie, A. (1996) ‗The process of commercialisation of urban housing in China', Urban Studies, 33, 971-989

Wooldridge, J. M. (2003) Introductory Econometrics: A Modern Approach, Australia, South-western College Publications

Wu, W. (1999) ‗Reforming China's institutional environment for urban infrastructure provision', Urban Studies, 36, 2263-2282

Xiao, T. and Yang, D. (2008) ‗Price and service competition of supply chains with risk-averse retailers under demand uncertainty', International Journal of Production Economics, 114, 187–200

Zilg, A. (2011) ‗THAT'S AMORE: Brand names in the Italian food market', International Journal of Applied Linguistics, 21, 1-25

Zou, P. X. W., Zhang, G. and Wang, J. (2007) ‗Understanding the key risks in construction projects in China', International Journal of Project Management, 25, 601-614

Article Metrics

Metrics Loading ...

Metrics powered by PLOS ALM