Can we be rational buying a house? A Behavioral Economics approach
Abstract
Standard economic theory considers that consumer decisions tent to be rational and, that consumer success in rationality depends on the importance of the decision: the more transcendental is a decision, the more rational the consumer will be. Then, buying a house would require our best but, can we really be rational facing a so complex issue? Behavioral economics is suspicious in this sense: decision makers tend to simplify problems using systematically some easy rules. This paper will describe how these rules, as the “isolation effect” and the “prominence effect”, affect consumers during their housing purchase.
Therefore, the main objective is to look over to literature in order to show those effects that question our rationality during the housing purchase decision. Then, a better understanding of consumers decisions will lead a global understanding of real estate market. In that sense, this paper should give a piece of advice to buyers and sellers, in order to help them to optimize their decisions.
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