Choosing Cities: A Behavioral Economic Approach

18 Pages Posted: 14 Mar 2018

See all articles by Marek Banczyk

Marek Banczyk

Columbia University; Cityglobe Inc.

Jo Laban Peryman

Behavioural Business Lab, RMIT University

Jason Potts

RMIT University

Date Written: March 12, 2018

Abstract

How do people and firms choose to relocate to new cities? We argue that this difficult yet consequential choice is often poorly made, or not made at all, resulting in under-mobility and consequent losses in individual utility and aggregate social welfare. We propose a behavioral economic theory of why this happens and the predictable directions in which failure occurs in terms of characteristic biases and heuristics in city choice (including status quo bias, loss aversion, endowment effect, availability heuristics, present bias, social norms, anchoring, elimination heuristics, sunk cost effects, and regret aversion). We examine how cities might mitigate this problem by improving information as inputs into choice and by redesigning the choice architecture to embed effective choice heuristics into city search and match databases.

Keywords: behavioural economics, cities, nudging

JEL Classification: D10, R10

Suggested Citation

Banczyk, Marek and Laban Peryman, Jo and Potts, Jason, Choosing Cities: A Behavioral Economic Approach (March 12, 2018). Annals of Regional Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3138365

Marek Banczyk

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Cityglobe Inc. ( email )

HOME PAGE: http://www.cityglobe.com

Jo Laban Peryman

Behavioural Business Lab, RMIT University ( email )

445 Swanston Street
Melbourne, 3000
Australia

Jason Potts (Contact Author)

RMIT University ( email )

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