An analysis of judgemental bias in housing choice
Scott, Peter J.
University of Cambridge
Department of Land Economy
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Scott, P. J. (2011). An analysis of judgemental bias in housing choice (doctoral thesis).
Buying a home is among the most important choices that any individual is likely to make in their lifetime. It has lasting consequences for happiness, well-being and personal finances. Yet, given the infrequency with which such decisions are made; the difficulty getting information from an opaque and decentralised marketplace; and the high transactions costs involved, there is a significant risk that decision making may depart from the high standard imposed by the normative economic concept of 'rational choice'. This thesis uses the insights of the economic theory of choice - from behavioural economics in particular - to examine housing choice from a new perspective. It considers the potential for estate agents, knowingly or otherwise, to exploit behavioural biases in decision making to influence preference and, ultimately, choices over housing. This naturally is of interest to estate agents and policy makers involved in housing markets; but most importantly to individuals as decision makers: making better decisions relies on understanding when and where vulnerability to manipulation may lie. Using evidence from a series of classroom experiments with 280 student volunteers and from two online surveys with over 4,000 adult respondents, significant areas where individuals may be consistently vulnerable to manipulation of judgement are found and recorded. In particular, both student and adult respondents are susceptible to biases involving manipulation of the decision making context, known as the choice frame. Students also tend to rely on arbitrary `anchor' points to make value estimates, which results in significantly impaired judgements, even in the presence of incentives for accuracy. Finally, evidence of a significant new form of behavioural bias is found, in which elements of the choice frame have an unexpectedly negative impact on perceptions. This new bias is persistent across several experimental scenarios and is labelled the 'choice pollution effect'.
Choice theory, Bias, Behaviour, Housing
This record's URL: http://www.dspace.cam.ac.uk/handle/1810/242424