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Reference dependence, loss aversion and residential property development decisions

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Bao, Helen X. H. 
Meng, Charlotte Chunming  ORCID logo
Wu, Jing 


Abstract: We analyse land transaction and residential development data from Beijing, China and identify that developers’ evaluation of land transaction exhibits reference dependence and loss aversion. Developers with prior land transaction losses set higher house prices than those without prior losses. This effect is strongest at the beginning and towards the end of the property sales period. It is moderated by developers’ ownership structure and listing status. Privately-owned firms experience stronger effects than their state-owned counterparts, whereas unlisted firms are more strongly affected than their listed counterparts. Results have implications on the relationship between the land and the housing markets in China. In a booming land market where land acquisition entails a high price, developers will transfer excess land price to house prices, thereby increasing the latter. The land market plays an integral role in managing housing prices in China.


Funder: Economic and Social Research Council; doi:

Funder: Newnham College, University of Cambridge; doi:


Article, Reference dependence, Loss aversion, Behavioural economics, Real estate development, Chinese housing market

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Journal of Housing and the Built Environment

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Springer Netherlands
National Natural Science Foundation of China (ES/P004296/1)