IDEAS home Printed from https://ideas.repec.org/a/vrs/remava/v32y2024i4p96-104n1008.html
   My bibliography  Save this article

How to Weaken the Endowment Effect in the Housing Market? The Role of Behavioral Interventions

Author

Listed:
  • Tomal Mateusz

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

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%.

Suggested Citation

  • Tomal Mateusz, 2024. "How to Weaken the Endowment Effect in the Housing Market? The Role of Behavioral Interventions," Real Estate Management and Valuation, Sciendo, vol. 32(4), pages 96-104.
    • Handle: RePEc:vrs:remava:v:32:y:2024:i:4:p:96-104:n:1008
    DOI: 10.2478/remav-2024-0038
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/remav-2024-0038
    Download Restriction: no
    File URL: https://libkey.io/10.2478/remav-2024-0038?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Philip S. Morrison & William A.V. Clark, 2016. "Loss aversion and duration of residence," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 35(36), pages 1079-1100.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rodrigo Cardoso & Evert Meijers & Maarten van Ham & Martijn Burger & Duco de Vos, 2019. "Why bright city lights dazzle and illuminate: A cognitive science approach to urban promises," Urban Studies, Urban Studies Journal Limited, vol. 56(2), pages 452-470, February.
    2. Azar, José & Marinescu, Ioana & Steinbaum, Marshall & Taska, Bledi, 2020. "Concentration in US labor markets: Evidence from online vacancy data," Labour Economics, Elsevier, vol. 66(C).
    3. Aude Bernard & Francisco Perales, 2021. "Is Migration a Learned Behavior? Understanding the Impact of Past Migration on Future Migration," Population and Development Review, The Population Council, Inc., vol. 47(2), pages 449-474, June.
    4. Riley Wilson, 2021. "Isolated States of America: The Impact of State Borders on Mobility and Regional Labor Market Adjustments," Upjohn Working Papers 21-358, W.E. Upjohn Institute for Employment Research.
    5. James, Amity & Rowley, Steven & Davies, Amanda & ViforJ, Rachel Ong & Singh, Ranjodh, 2021. "Population growth and mobility in Australia: implications for housing and urban development policies," SocArXiv zb5kc, Center for Open Science.
    6. Aude Bernard & Francisco Perales, 2024. "The intergenerational transmission of migration capital: The role of family migration history and lived migration experiences," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 50(29), pages 827-870.
    7. Taha H Rashidi & Milad Ghasri, 2019. "A competing survival analysis for housing relocation behaviour and risk aversion in a resilient housing market," Environment and Planning B, , vol. 46(1), pages 122-142, January.
    8. Kazhamiaka, Fiodar & Jochem, Patrick & Keshav, Srinivasan & Rosenberg, Catherine, 2017. "On the influence of jurisdiction on the profitability of residential photovoltaic-storage systems: A multi-national case study," Energy Policy, Elsevier, vol. 109(C), pages 428-440.
    9. Kyriaki Kalimeri & Alessandro Rosina & Andrea Bonanomi & Mariano G. Beiró & Ciro Cattuto, 2020. "Traditional versus Facebook-based surveys: Evaluation of biases in self-reported demographic and psychometric information," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 42(5), pages 133-148.
    10. Wilson, Riley, 2022. "The Isolated States of America: Home State Bias, State Identity, and the Impact of State Borders on Mobility," IZA Discussion Papers 15193, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    endowment effect; prospect theory; behavioral interventions; housing market;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:remava:v:32:y:2024:i:4:p:96-104:n:1008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.