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The Effect of Anchoring Bias on the Estimation of Asking and Transaction Prices in the Housing Market

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  • Węgrzyn Joanna

    (Department of Real Estate and Investment Economics, Krakow University of Economics, ul. Rakowicka 27, 31-510 Kraków, Poland)

  • Kuta Julia

    (Department of Real Estate and Investment Economics, Krakow University of Economics, ul. Rakowicka 27, 31-510 Kraków, Poland)

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.

Suggested Citation

  • Węgrzyn Joanna & Kuta Julia, 2024. "The Effect of Anchoring Bias on the Estimation of Asking and Transaction Prices in the Housing Market," Real Estate Management and Valuation, Sciendo, vol. 32(4), pages 1-11.
    • Handle: RePEc:vrs:remava:v:32:y:2024:i:4:p:1-11:n:1001
    DOI: 10.2478/remav-2024-0031
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    References listed on IDEAS

    as
    1. Diego Salzman & Remco C.J. Zwinkels, 2017. "Behavioral Real Estate," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 25(1), pages 77-106, January.
    2. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
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    More about this item

    Keywords

    anchoring; behavioral real estate; housing; experiment; Poland;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D10 - Microeconomics - - Household Behavior - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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