The Price of Inattention: Evidence from the Swedish Housing Market

Alex Solís

24 citations0/0 files storedJournal of the European Economic Association

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Decision-Making and Behavioral Economics Housing Market and Economics Auction Theory and Applications

Abstract

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.

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References

1974Judgment under Uncertainty: Heuristics and Biases 1975Judgment under Uncertainty: Heuristics and Biases 1955A BEHAVIORAL MODEL OF RATIONAL CHOICE 2000Fairness and Retaliation: The Economics of Reciprocity 2009Salience and Taxation: Theory and Evidence 2009Psychology and Economics: Evidence from the Field 2001Loss Aversion and Seller Behavior: Evidence from the Housing Market 2006Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

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2022Dark commercial patterns 2023Left-Digit Bias at Lyft 2023How price labeling strategy affects consumers' purchase intention? The role of perceived price difference in price assessment 2024Loss aversion and focal point bias: Empirical evidence from housing markets 2020Anchoring on Historical Reference Points: How Round Number Prices from the Past Shape Future Negotiation Outcomes

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