Understanding Homeowners’ Pricing Decisions: An Investigation of the Roles of Ownership Duration and Financial and Emotional Reference Points

46 Pages Posted: 31 Mar 2014  

Katherine Loveland

Xavier University - Williams College of Business Administration

Naomi Mandel

Arizona State University (ASU) - Marketing Department

Utpal M. Dholakia

Rice University - Jesse H. Jones Graduate School of Business

Date Written: March 30, 2014

Abstract

In this research, we examined the interactive effects of duration of ownership with both financial (change relative to purchase price) and emotional (accumulation of positive vs. negative memories) reference points on home sellers’ initial asking prices and the stickiness of those prices. We found convergent results in a field study of house listings in four US markets (Phoenix, Minneapolis, Philadelphia and Wilmington) and a laboratory experiment. In particular, we found that after a long ownership duration, sellers ask for higher prices when they are in the gains domain than in the losses domain (a reversal of Prospect Theory), whereas after a short ownership duration, sellers ask for lower prices when they are in the gains domain than when they are in the losses domain.

Keywords: reference points, behavioral decision theory, prospect theory, emotional reference point, endowment effect, home pricing

Suggested Citation

Loveland, Katherine and Mandel, Naomi and Dholakia, Utpal M., Understanding Homeowners’ Pricing Decisions: An Investigation of the Roles of Ownership Duration and Financial and Emotional Reference Points (March 30, 2014). Available at SSRN: https://ssrn.com/abstract=2417898 or http://dx.doi.org/10.2139/ssrn.2417898

Katherine Loveland (Contact Author)

Xavier University - Williams College of Business Administration ( email )

3800 Victory Parkway
Cincinnati, OH 45207
United States

Naomi Mandel

Arizona State University (ASU) - Marketing Department ( email )

Tempe, AZ 85287-4106
United States

Utpal M. Dholakia

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

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