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Mental accounting in the housing market


  • Johan Almenberg
  • Artashes Karapetyan


We identify a consumer bias with regard to different sources of debt-financing. Less salient debt may generate psychological benefits.This should be weighed against the possible economic costs of a suboptimal capital structure, but low levels of financial literacy make it unlikely that all households perceive the full economic costs. As a result there is a bias in favour of less salient debt. In a market with limited scope for arbitrage this consumer bias is likely to generate inefficiencies. We examine such a market in both theory and practice. The predictions of our model are given strong support by market data.

Suggested Citation

  • Johan Almenberg & Artashes Karapetyan, 2009. "Mental accounting in the housing market," IEW - Working Papers 453, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:453

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Diego Salzman, 2013. "Behavioural Real Estate," ERES eres2013_334, European Real Estate Society (ERES).
    2. Diego A. Salzman & Remco C.J. Zwinkels, 2013. "Behavioural Real Estate," Tinbergen Institute Discussion Papers 13-088/IV/DSF58, Tinbergen Institute.
    3. 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.

    More about this item


    Household finance; mental accounting; 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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