This study examines the interactions within trading decisions, concentrating on psychological constructs such as empathy and endowment perception. It integrates fairness perception and emotional attachment as potential mediators and decision uncertainty, as well as risk attitude as moderators, offering insights on behavioral patterns in the consumer-to-consumer market.
The research employs a quantitative method and a structured questionnaire was used as an instrument, collecting a total of 415 responses from customers actively involved in trading in Karnataka, India. The data analysis included structural equation modeling (SEM), measuring the direct, indirect, as well as total effects of the psychological constructs on trading decisions.
The findings show that while empathy has a negative direct effect on trading decision outcomes, it has a positive indirect effect through the effect of fairness perception. Like empathy, endowment perception also indicated mixed outcomes during the research study. Further, risk attitude and decision uncertainty had a significant moderation effect on these relationships. Overall, fairness perception is reflected as a critical mediator, re-framing the psychological barriers to trading decisions.
Policymakers and trading platforms can incorporate strategies to reduce the negative consequences of emotional and psychological biases via interventions, including improved transparency, as well as fair trading practices.
This study boosts the literature on behavioral finance by merging various theories, like prospect theory, psychological ownership theory and equity theory.
