The Impact of Remembered Air Pollution on House Resale Prices

26 Pages Posted: 28 Mar 2022

See all articles by Hui Deng

Hui Deng

Tsinghua University

Zan Yang

Tsinghua University

Abstract

We investigate the impact of memory on consumption by linking random disturbances due to variations in air pollution during house viewings with the final house resale transaction price. We use tracked air pollution on the day of viewing and a cross-sectional model with community fixed effects to show that exposure to air pollution results in increased transaction prices. On average, the premium induced by air pollution accounts for approximately 0.3% of the total value of a house. The mechanism analysis reveals that participants are willing to pay more for houses with anti-pollution attributes if they experienced heavy pollution on the day of the viewing. This finding is consistent with projection bias: people project not only the current utility but also remembered utility when making intertemporal decisions.

Keywords: High-stakes decision-making, remembered air pollution, projection bias, housing price

Suggested Citation

Deng, Hui and Yang, Zan, The Impact of Remembered Air Pollution on House Resale Prices. Available at SSRN: https://ssrn.com/abstract=4068217 or http://dx.doi.org/10.2139/ssrn.4068217

Hui Deng

Tsinghua University ( email )

Beijing, 100084
China

Zan Yang (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

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