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Round-Number Effects in Real Estate Prices: Evidence from Germany

Author

Listed:
  • Florian Englmaier

    (LMU Munich)

  • Andreas Roider

    (Universität Regensburg)

  • Lars Schlereth

    (Universität Regensburg)

  • Steffen Sebastian

    (Universität Regensburg)

Abstract

Round numbers affect behavior in various domains, e.g., as prominent thresholds or focal points in bargaining. In line with earlier findings, residential real estate transactions in Germany cluster at round-number prices, but there are also interesting (presumably cultural) differences. We extend our analysis to the commercial real estate market, where stakes are even higher and market participants arguably more experienced. For the same type of object, professionals cluster significantly less on round-number prices compared to non-professionals. We employ machine learning and show that transactions of family homes and condominiums at round-number prices are 2–7% above their hedonic values.

Suggested Citation

  • Florian Englmaier & Andreas Roider & Lars Schlereth & Steffen Sebastian, 2023. "Round-Number Effects in Real Estate Prices: Evidence from Germany," Rationality and Competition Discussion Paper Series 446, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:446
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    More about this item

    Keywords

    round-number effects; focal points; residential real estate; commercial real estate; housing prices; machine learning;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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