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Consumer house price judgements: new evidence of anchoring and arbitrary coherence

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  • Peter J. Scott
  • Colin Lizieri

Abstract

Individuals are prone to significant errors when making value judgements through the use of heuristics (cognitive short cuts) to simplify decision making. This paper uses an economic experiment to investigate the strength of arbitrary anchors in judgements over house prices among a student group, which shares similarities with first-time buyers. The study represents an extension of existing property research literature on valuation because it focuses on consumers, not professionals, and uses experiments which are incentivised. Additionally it investigates the evolution of price estimates over multiple sequential property viewings. The results indicate that even in the presence of significant, binary incentives for accurate judgement, individuals rely, to a significant degree, on an arbitrarily established anchor value. Such anchors remain powerful enough for transitions to subsequent valuations to remain influenced by this initial value. This is interpreted as a confirmation -- and extension -- of the arbitrary coherence reported in other studies of consumer judgement.

Suggested Citation

  • Peter J. Scott & Colin Lizieri, 2011. "Consumer house price judgements: new evidence of anchoring and arbitrary coherence," Journal of Property Research, Taylor & Francis Journals, vol. 29(1), pages 49-68, October.
    • Handle: RePEc:taf:jpropr:v:29:y:2011:i:1:p:49-68
    DOI: 10.1080/09599916.2011.638144
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    Citations

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    Cited by:

    1. Thanos, Sotirios & Dubé, Jean & Legros, Diègo, 2016. "Putting time into space: the temporal coherence of spatial applications in the housing market," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 78-88.
    2. Jean Dubé & Diègo Legros & Sotirios Thanos, 2018. "Past price ‘memory’ in the housing market: testing the performance of different spatio-temporal specifications," Spatial Economic Analysis, Taylor & Francis Journals, vol. 13(1), pages 118-138, January.
    3. Gillitzer, Christian & Sinning, Mathias, 2020. "Nudging businesses to pay their taxes: Does timing matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 284-300.
    4. Dean Gatzlaff & Peng Liu, 2013. "List Price Information in the Negotiation of Commercial Real Estate Transactions: Is Silence Golden?," The Journal of Real Estate Finance and Economics, Springer, vol. 47(4), pages 760-786, November.
    5. O. Alan Tidwell & Paul Gallimore, 2014. "The influence of a decision support tool on real estate valuations," Journal of Property Research, Taylor & Francis Journals, vol. 31(1), pages 45-63, March.
    6. Ünveren, Burak & Baycar, Kazım, 2019. "Historical evidence for anchoring bias: The 1875 cadastral survey in Istanbul," Journal of Economic Psychology, Elsevier, vol. 73(C), pages 1-14.
    7. Geoffrey Gikonyo Gitau & David N. Kiragu & Riro Kamau, 2018. "Effect of Heuristic Factors and Real Estate Investment in Embu County, Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(4), pages 30-38, October.
    8. Deborah Levy & Zhi Dong & James Young, 2016. "Unintended consequences: the use of property tax valuations as guide prices in Wellington, New Zealand," Housing Studies, Taylor & Francis Journals, vol. 31(5), pages 578-597, July.
    9. Arshad Ali Javed & Patrick T.I. Lam & Albert P.C. Chan, 2014. "Change negotiation in public-private partnership projects through output specifications: an experimental approach based on game theory," Construction Management and Economics, Taylor & Francis Journals, vol. 32(4), pages 323-348, April.

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