307 research outputs found
Controlling for transactions bias in regional house price indices
Transactions bias arises when properties that trade are not a random sample of the total housing stock. Price indices are susceptible because they are typically based on transactions data. Existing approaches to this problem rely on Heckman-type correction methods, where a probit regression is used to capture the differences between properties that sell and those that do not sell in a given period. However, this approach can only be applied where there is reliable data on the whole housing stock. In many countries—the UK included—no such data exist and there is little prospect of correcting for transactions bias in any of the regularly updated mainstream house price indices. Thispaper suggests a possible alternative approach, using information at postcode sector level and Fractional Probit Regression to correct for transactions bias in hedonic price indices based on one and a half million house sales from 1996 to 2004, distributed across 1200 postcode sectors in the South East of England
Reference Distorted Prices
I show that when consumers (mis)perceive prices relative to reference prices,
budgets turn out to be soft, prices tend to be lower and the average quality of
goods sold decreases. These observations provide explanations for decentralized
purchase decisions, for people being happy with a purchase even when they have
paid their evaluation, and for why trade might affect high quality local firms
'unfairly'
Loss Aversion and Anchoring in Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications
Tractable consumer choice
We derive a rational model of separable consumer choice which can also serve as a
behavioral model. The central construct is [lambda] , the marginal utility of money, derived
from the consumer's rest-of-life problem. We present a robust approximation of [lambda],
and show how to incorporate liquidity constraints, indivisibilities and adaptation to
a changing environment. We fi nd connections with numerous historical and recent
constructs, both behavioral and neoclassical, and draw contrasts with standard partial
equilibrium analysis. The result is a better grounded, more
flexible and more intuitive description of consumer choice
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