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Mental accounting in the housing market

Author

Listed:
  • 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.

Suggested Citation

  • Johan Almenberg & Artashes Karapetyan, 2010. "Mental accounting in the housing market," Working Paper 2010/20, Norges Bank.
  • Handle: RePEc:bno:worpap:2010_20
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    File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2010/WP-201020/
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    References listed on IDEAS

    as
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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 19:29:00

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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/DSF58, Tinbergen Institute.
    2. Eva M. Berger & Felix Schmidt, 2017. "Unburden Renters by Making Landlords Pay the Commission? Evaluating a Policy Reform in Germany," Working Papers 1716, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    3. Diego Salzman, 2013. "Behavioural Real Estate," ERES eres2013_334, European Real Estate Society (ERES).

    More about this item

    Keywords

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

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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