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Mental accounting in the housing market

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  • Johan Almenberg

    ()
    (Swedish Ministry of Finance)

  • Artashes Karapetyan

    ()
    (Norges Bank (Central Bank of Norway))

Abstract

We report evidence that salience may have economically significant effects on homeowners' borrowing behavior, through a bias in favour of less salient but more costly loans. We outline a simple model in which some consumers are biased. Under plausible assumptions, the bias may affect prices in equilibrium. Market data support the predictions of the model.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2010/WP-201020/
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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2010/20.

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Length: 30 pages
Date of creation: 16 Nov 2010
Date of revision:
Handle: RePEc:bno:worpap:2010_20

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Keywords: salience; housing market; household finance; co-op; capital structure;

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References

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  1. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
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  10. Amy Finkelstein, 2007. "E-ZTax: Tax Salience and Tax Rates," NBER Working Papers 12924, National Bureau of Economic Research, Inc.
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  17. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
  18. Marianne Bertrand & Dean Karlin & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," NBER Working Papers 11892, National Bureau of Economic Research, Inc.
  19. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Compartmentalized thinking in personal finances
    by Economic Logician in Economic Logic on 2011-05-16 14:29:00
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Cited by:
  1. Diego A. Salzman & Remco C.J. Zwinkels, 2013. "Behavioural Real Estate," Tinbergen Institute Discussion Papers 13-088/IV/DSF57, Tinbergen Institute.

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