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Decision making in the pre-development stage of residential development

Satakhun Kosavinta (School of Management, Asian Institute of Technology, Pathum Thani, Thailand)
Donyaprueth Krairit (School of Management, Asian Institute of Technology, Pathum Thani, Thailand) (NIDA Business School, Bangkok, Thailand)
Do Ba Khang (School of Management, Asian Institute of Technology, Pathum Thani, Thailand)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 6 March 2017

682

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.

Keywords

Citation

Kosavinta, S., Krairit, D. and Khang, D.B. (2017), "Decision making in the pre-development stage of residential development", Journal of Property Investment & Finance, Vol. 35 No. 2, pp. 160-183. https://doi.org/10.1108/JPIF-05-2016-0030

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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