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The Price of Inattention: Evidence from the Swedish Housing Market
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2017 (English)Report (Other academic)
Abstract [en]

Do behavioral biases affect prices in a high-stake market? We study the role of left-digitbias in the purchase of an apartment, one of the most important assets in a household’sportfolio. Left-digit bias is the inability to fully process digits after the first, perceivingprices just below a round number (such as $3.99) as cheaper than their roundcounterpart ($4). We start by documenting that apartments listed at just-below asking prices are sold at a 3-5% higher final price after an auction. This effect appears not to bedriven by i) differences in observable characteristics; ii) differences in real estate agents’behavior; or iii) institutional characteristics of the market. We show that apartments using just-below prices attract more bidders and bids, leading to higher competition and to a higher final price. Our results suggest that inattentive buyers might be losing roughlyhalf a year of disposable income.

Place, publisher, year, edition, pages
Uppsala, 2017. , p. 48
Series
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975 ; 2017:10
Keywords [en]
Housing market, auctions, inattention, first-digit bias
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-331189OAI: oai:DiVA.org:uu-331189DiVA, id: diva2:1148668
Available from: 2017-10-11 Created: 2017-10-11 Last updated: 2017-10-12Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf