Behavioural Biases on Residential House Purchase Decisions: A Multi-Criteria Decision-Making Approach

In this study, we examine if behavioural biases, such as framing effects, escalation of commitment, and overconfidence are present when residential property purchasers are choosing between alternative properties. To accomplish same, we use a Multi-Criteria Decision-Making (MCDM) approach to examine the behaviour of property purchasers in Dublin during the property boom of 2005.The study was designed using a case study approach and the participants used a Multi-Criteria Decision-Making analysis tool to aid in their selection between alternative properties. The decision tool that was used is Direct-Interactive: i.e., the Decision-Maker gives scores and weights directly and is able to adjust them during the process. It also uses Structured-Criteria, i.e. it tracks elements of the decision to specific disaggregated criteria of the decision-maker.This research finds that using a decision tool provides better decisions as was expected from the method, however, a subset of property buyers resisted applying the tool to make non-rational choices. This indicates how strong behavioural biases can be and how influencing their affect is, even when making large monetary decisions. In conclusion, when a decision-making tool is introduced to enable property purchasers to improve their decision-making capability, a subset of property buyers may resist applying the tool to let their behavioural biases potentially override rational decision-making.