Acquiring Land in Cold Winter: Consequences and Possible Explanations

69 Pages Posted: 12 Nov 2019 Last revised: 10 Aug 2022

See all articles by Yinghao Pan

Yinghao Pan

Renmin University of China

Yu Qin

National University of Singapore (NUS) - Department of Real Estate

Fan Zhang

Jinan University; University of International Business and Economics (UIBE)

Hongjia Zhu

Jinan University

Date Written: November 2, 2019

Abstract

This paper documents the environmentally induced behavioral biases in the land market and
shows how buyers correct their biases by learning from repeated transactions. Using a sample of
government land sales along two sides of the heating service line in China, we first show land parcels transacted in the south in the winter are associated with an average price discount of 7.1%, compared to transactions in the north where heating service is provided. We discuss three possible explanations, including projection bias, incorrect belief, and salience bias. We find adverse weather such as low temperature and extreme weather may trigger the mispricing in the absence of the heating service, lending support to the projection bias. Moreover, our empirical investigations suggest the local government, as the only land seller, responds weakly to such biases. We also provide suggestive evidence that individual buyers in the south can learn from prior experience.

Keywords: land price, heating, projection bias, learning

JEL Classification: D91, Q51, R32

Suggested Citation

Pan, Yinghao and Qin, Yu and Zhang, Fan and Zhu, Hongjia, Acquiring Land in Cold Winter: Consequences and Possible Explanations (November 2, 2019). Journal of Environmental Economics and Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3479523 or http://dx.doi.org/10.2139/ssrn.3479523

Yinghao Pan

Renmin University of China ( email )

Beijing

HOME PAGE: http://yinghaopan.com

Yu Qin (Contact Author)

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Fan Zhang

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

University of International Business and Economics (UIBE) ( email )

10 Huixin East St.
Beijing, Beijing 100029
China

Hongjia Zhu

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

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