Norges Bank

Working Paper

Mental accounting in the housing market

Author:
Johan Almenberg and Artashes Karapetyan
Series:
Working Paper
Number:
20/2010

Abstract
We report evidence that salience may have economically significant effects on homeowners' borrowing behavior, through a bias in favour of less salient but more costly loans. We outline a simple model in which some consumers are biased. Under plausible assumptions, the bias may affect prices in equilibrium. Market data support the predictions of the model.

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ISSN 1502-8190 (online)

Published 17 November 2010 09:46
Edited 22 November 2010 15:07
Published 17 November 2010 09:46
Edited 22 November 2010 15:07