HIGHLIGHTS
  • behavioral interventions aim to highlight and visualise relevant information
  • the endowment effect exists in the Polish housing market
  • the endowment effect is significantly weakened after behavioral interventions
KEYWORDS
TOPICS
ABSTRACT
The endowment effect is one of the key behavioral biases causing friction in the housing market. It results in sellers' offer prices being inflated relative to buyers' bid prices. Although this effect has been confirmed in many studies, little is known about how it can be reduced or eliminated. Therefore, this article assesses the impact of behavioral interventions on the intensity of the endowment effect using the Polish housing market as a case study. The research was based on a lab-in-the-field experiment, in which a hypothetical transaction in the secondary sales housing market was simulated and the recruited respondents were randomly divided into sellers and buyers. The endowment effect was measured by the gap between the average value of minimum prices for which sellers would be willing to sell a dwelling (WTA) and the average value of maximum prices that buyers would be willing to pay to acquire that dwelling (WTP). The results show that the endowment effect significantly decreases but does not disappear after the application of behavioral interventions. The latter consists of highlighting relevant information about the market price of a property and visualizing it graphically. Specifically, before the intervention, the WTA-WTP gap was 7.01%, and after 2.48%.
FUNDING
The publication presents the results of the Project financed from the subsidy granted to the Krakow University of Economics.
CONFLICT OF INTEREST
The Author is a section editor of Real Estate Management and Valuation but took no part in the peer review and decision-making processes for this article.
eISSN:2300-5289
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