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Focal points and bargaining in housing markets


  • Pope, Devin G.
  • Pope, Jaren C.
  • Sydnor, Justin R.


Are focal points important for determining the outcome of high-stakes negotiations? We investigate this question by examining the role that round numbers play as focal points in negotiations in the housing market. Using a large dataset on home transactions in the U.S., we document sharp spikes in the distribution of final negotiated house prices at round numbers, especially those divisible by $50,000. The patterns cannot be easily explained by simple stories of convenience rounding or by list prices. We conclude that round numbers can serve as focal points, even in settings with very high stakes.

Suggested Citation

  • Pope, Devin G. & Pope, Jaren C. & Sydnor, Justin R., 2015. "Focal points and bargaining in housing markets," Games and Economic Behavior, Elsevier, vol. 93(C), pages 89-107.
  • Handle: RePEc:eee:gamebe:v:93:y:2015:i:c:p:89-107
    DOI: 10.1016/j.geb.2015.07.002

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    References listed on IDEAS

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    Cited by:

    1. Eid, Nourhan & Maltby, Josephine & Talavera, Oleksandr, 2016. "Income Rounding and Loan Performance in the Peer-to-Peer Market," MPRA Paper 72852, University Library of Munich, Germany.

    More about this item


    Focal points; Bargaining; Housing prices;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory


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