Abstract

http://ssrn.com/abstract=1973326
 
 

References (45)



 


 



Anchoring and Housing Choice: Results of a Natural Policy Experiment


Yuval Arbel


Technion-Israel Institute of Technology - Faculty of Architecture and Town Planning

Danny Ben-Shahar


Tel Aviv University

Stuart A. Gabriel


University of California, Los Angeles - Anderson School of Management

December 15, 2011


Abstract:     
This research applies data from a unique natural policy experiment to assess the effects of heuristics on housing decisions and public policy outcomes. The data derive from programs designed to privatize public housing in Israel. The programs provided tenants with a call (real) option to purchase their rental unit at a discounted exercise price. We employ a panel of 9,547 transactions over the 1999-2008 period to assess the role of heuristics in determination of privatization outcomes. Specifically, we evaluate whether tenants used prior program price discounts as anchors in their purchase decisions. Results of hazard model estimation provide strong evidence of anchoring effects in the timing of home purchase. Further, model simulation suggests that by accounting for the anchoring heuristic, the government could have both accelerated the purchase decision by an average of 38 months and increased revenues associated with the privatization programs by 27 percent. We also find evidence that anchoring varies with individual and housing market characteristics.

Number of Pages in PDF File: 39

Keywords: anchoring, public housing, behavioral economics

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Date posted: December 17, 2011  

Suggested Citation

Arbel, Yuval and Ben-Shahar, Danny and Gabriel, Stuart A., Anchoring and Housing Choice: Results of a Natural Policy Experiment (December 15, 2011). Available at SSRN: http://ssrn.com/abstract=1973326 or http://dx.doi.org/10.2139/ssrn.1973326

Contact Information

Yuval Arbel
Technion-Israel Institute of Technology - Faculty of Architecture and Town Planning ( email )
Technion City
Haifa 32000
Israel
Danny Ben-Shahar
Tel Aviv University ( email )
Tel Aviv
Israel
Stuart A. Gabriel (Contact Author)
University of California, Los Angeles - Anderson School of Management ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-2922 (Phone)
310-206-5455 (Fax)
HOME PAGE: http://www.anderson.ucla.edu
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