Loss aversion and housing studies
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Abstract
Low frequency and high involvement in property transactions make loss aversion a relevant subject in housing studies. Advances in studies on loss aversion effects considerably enhance our understanding of much-debated topics in housing research. Loss aversion, similar to behavioral sciences in general, has found applications in a wide range of research areas; however, evidence in housing studies remains scarce. We provide a review of loss aversion literature to aid future research in this direction by conducting a survey of both business and economics papers and real estate publications. We discuss practical issues pertaining to research methodology and its empirical applications in housing markets. We recommend that further studies adopt robust measurement of both reference points and loss aversion, and collect empirical evidence on a broad range of topics. Our summary and discussions provide a helpful guideline for empirical investigations on the role of loss aversion in housing studies.