A Behavioral Analysis of Shanghai Real Estate Prices
37 Pages Posted: 29 Aug 2006
Date Written: August 28, 2006
In a field study, we identified an intriguing inconsistency between real estate developers' desired sales pattern (selling all apartments at the same rate) and the actual sales pattern (selling good apartments faster). We 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. We corroborated our explanation with controlled experiments using potential Shanghai homebuyers and actual Shanghai real estate developers as participants. To the best of our knowledge, this is the first research to relate the prominence principle to a real-world issue in one of the world's most active markets.
Keywords: pricing, prominence, choice, matching, behavioral
JEL Classification: D12, L1, M31
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