The effect of anchoring bias on the estimation of asking and transaction prices in the housing market
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Department of Real Estate and Investment Economics, Krakow University of Economics, Poland
These authors had equal contribution to this work
Submission date: 2024-01-07
Final revision date: 2024-04-18
Acceptance date: 2024-05-14
Corresponding author
Joanna Wegrzyn
Department of Real Estate and Investment Economics, Krakow University of Economics, Poland
HIGHLIGHTS
- the paper refers to the behavioural biases on the real estate marker
- the research investigates the transmission of biases through several estimations
- the strength of arbitrary anchors differs in estimating asking and transaction prices in the housing market
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ABSTRACT
This paper investigates the anchoring bias in the real estate market, focusing on the impact of uninformative random values on price estimations. Through a randomized controlled trial, the study examines whether selective accessibility contributes to the anchoring effect and to what extent the bias is transmitted from estimated asking prices to transaction prices on the primary housing market. The study was conducted in 2023 among Krakow University of Economics students on the example of the Krakow housing market in Poland. A multiple regression model indicates that randomly assigned numbers serve as cues affecting price estimations, with potential differences of up to 10.5% of the asking price offered by a developer. Additionally, gender and decision-making competencies influence estimation patterns, suggesting varying attitudes towards price-setting strategies that can be implemented by developers. These findings contribute to understanding the complexities of decision-making in real estate markets and highlight avenues for further research.
FUNDING
This work was supported by the Krakow University of Economics, Poland.