Work

The Price of Inattention: Evidence from the Swedish Housing Market

Year: 2019

Type: article

Abstract: Do behavioral biases affect prices in a high-stakes market? We study the role of left-digit bias in the purchase of an apartment. Left-digit bias is the failure to fully process digits after the first, perceiving prices just below a round number (such as $3.99) as cheaper than their round counterpart ($4). Apartments with asking prices just below round millions are sold at a 3%–5% higher final price after an auction. This effect appears not to be driven by differences in observables or in real estate agents’ behavior. Auctions for apartments listed just below round numbers are more competitive and attract more bidders and bids.

Source: Journal of the European Economic Association

DOI: 10.1093/jeea/jvz065

Authors: Luca Repetto, Alex Solís

Institution: Uppsala University

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2763324792

FWCI: 1.407

Cites: 56

Cited by: 24

Related to: 10