Citation

Discussion Paper Details

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Title: Loss Aversion and Seller Behaviour: Evidence from the Housing Market

Author(s): David Genesove and Christopher Mayer

Publication Date: May 2001

Keyword(s): Housing Markets, Loss Aversion and Prospect Theory

Programme Area(s): Industrial Organization

Abstract: Data from downtown Boston in the 1990s show that loss aversion determines seller behaviour in the housing market. Condominium owners subject to nominal losses: (1) set higher asking prices of 25-35% of the difference between the property?s expected selling price and their original purchase price; (2) attain higher selling prices of 3-18% of that difference; and (3) exhibit a much lower sale hazard than other sellers. The list price results are twice as large for owner-occupants as for investors, but hold for both. These findings are consistent with prospect theory and help explain the positive price-volume correlation in real estate markets.

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Bibliographic Reference

Genesove, D and Mayer, C. 2001. 'Loss Aversion and Seller Behaviour: Evidence from the Housing Market'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2813