Can information regarding previous sales stabilize the house price index? Evidence from a field experiment in Spain
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Can information regarding previous sales stabilize the house price index? Evidence from a field experiment in Spain Josep Maria Raya1,2 · Giovanni Giusti1,2,3 Received: 21 February 2019 / Accepted: 1 August 2020 © Springer Nature B.V. 2020
Abstract We compare the impact of two different listing price strategies for residential homes on the purchasing price of a property. Previous literature on anchoring effect (Tversky and Kahneman in Science 185(4157):1124–1131, 1974) has encountered a direct relation between the listing price and the sale price. Among the listing prices, the asking price, proposed by the seller, has been found to systematically influence the final purchasing price (Bucchianeri and Minson in J Econ Behav Org 89:76–92, 2013; Han and Strange in J Urban Econ 93:115–130, 2016). In this paper, we study the effect of another possible anchor, the last sale price, given its extended use in important housing markets, such as the US. By means of a controlled field experiment carried out in a real estate agency, we find that when the previous purchasing price is available, buyers’ offers are characterized by a smaller variance from the average offered price, compared to when only the asking price is reported. This result suggests that the previous sale price is a stronger predictor of purchasing price than the asking price is and could be a valid instrument for policy purposes. Keywords Housing · Controlled field experiment · Listing prices · Anchoring effect
1 Introduction Consider the following situation. You are visiting a real-estate agency looking to buy an apartment in your favorite neighborhood in your town. The real-estate agent shows you a set of properties fitting your preferences and willingness to pay by presenting you with some photos, a list of characteristics, such as exact location, square meters, number of rooms, and bathrooms, of each available property.
* Giovanni Giusti [email protected] Josep Maria Raya [email protected] 1
Escola Superior de Ciències Socials I de L’Empresa (Tecnocampus, Universitat Pompeu Fabra), C/ Ernest Lluch 32, 08302 Mataró, Barcelona, Spain
2
Universitat Pompeu Fabra, Barcelona, Spain
3
Economic Science Laboratory, University of Arizona, Tucson, AZ, USA
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J. M. Raya, G. Giusti
Thanks to your previous research and your own experience, you already have a good idea about the average price for properties with these characteristics and in this area. Now, the agent shows you information of an apartment that was just put up for sale and communicate you the asking price proposed by the seller. Would this price information affect your price valuation of the apartment? Now imagine the same situation but, in addition to the asking price, the agent tells you how much that apartment was previously paid by the current owner. Would that additional piece of information affect the price you are willing to offer? Moreover, which of the two listed prices would have a stronger weight on your evaluation, if any? In this paper, we address th
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