The Effect of Anchoring Bias on the Estimation of Asking and Transaction Prices in the Housing Market

Abstract

This paper investigates the anchoring bias in the real estate market, focusing on the impact of uninformative random values on price estimations. Through a randomized controlled trial, the study examines whether selective accessibility contributes to the anchoring effect and to what extent the bias is transmitted from estimated asking prices to transaction prices on the primary housing market. The study was conducted in 2023 among Krakow University of Economics students on the example of the Krakow housing market in Poland. A multiple regression model indicates that randomly assigned numbers serve as cues affecting price estimations, with potential differences of up to 10.5% of the asking price offered by a developer. Additionally, gender and decision-making competencies influence estimation patterns, suggesting varying attitudes towards price-setting strategies that can be implemented by developers. These findings contribute to understanding the complexities of decision-making in real estate markets and highlight avenues for further research.