Irrationality and economic morality of SMEs’ behavior during the Covid-19 pandemic: lesson from Indonesia

Abstract

The Covid-19 pandemic provides severe consequences of economic behavior as an increase of unemployment rates, and providing a new business creation can continue the economic activities. This study explores a functional relationship between irrational behavior, which proxied by loss aversion, the endowment effect, and herd behavior toward the morality of economic among small and medium enterprises (SMEs), as well as the mediating role of altruism in the perspectives of behavioral economics. The research involved a quantitative survey and cross-sectional data with a sample of 288 SMEs in East Java of Indonesia. Using structural equation modeling, the findings reveal that the endowment effect and herd behavior have a robust relationship with economic morality. This study also notes that altruism has a positive link with economic morality, and it has successfully mediated the irrational behavior of SMEs in Indonesia. In addition, the marketing strategy also distinguishes altruism's impact on morality economic.

Keywords

• Altruism
• Endowment effect
• Herd behavior
• Morality economic
• Small and medium enterprises