Prominence Effect in Shanghai Apartment Prices

Journal of Marketing Research, Vol. 45, No. 2, pp. 133-144, 2008

22 Pages Posted: 23 May 2008  

Christopher K. Hsee

University of Chicago - Booth School of Business

Jean-Pierre Dubé

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Yan Zhang

University of Chicago - Booth School of Business

Abstract

A field study conducted in Shanghai identified a robust inconsistency between real estate developers' desired sales pattern (selling all apartments in a building at similar rates) and the actual sales pattern (selling good apartments faster). The authors explained this inconsistency with Tversky, Sattath, and Slovic (1988)'s prominence principle, according to which buyers, who were in a choice mode, weighed the desirability of floors more heavily than developers, who were in a matching mode when setting prices. This explanation is corroborated by controlled experiments involving potential homebuyers and professional real-estate price-setters. The research relates an intriguing anomaly originally found in paper-and-pencil surveys to a real-world issue in one of the world's most active markets. These findings also have implications for issues beyond real estate markets.

Keywords: real estate, pricing, preference reversal, prominence effect, choice vs. matching

JEL Classification: D12, L1, M31

Suggested Citation

Hsee, Christopher K. and Dubé, Jean-Pierre and Zhang, Yan, Prominence Effect in Shanghai Apartment Prices. Journal of Marketing Research, Vol. 45, No. 2, pp. 133-144, 2008. Available at SSRN: https://ssrn.com/abstract=1105520

Christopher K. Hsee (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Jean-Pierre H. Dube

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://gsb.uchicago.edu/fac/jean-pierre.dube

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yan Zhang

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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