Reference Dependence in the Housing Market

Steffen Andersen, Cristian Badarinza, Lu Liu, Julie Marx, Tarun Ramadorai

Research output: Contribution to conferencePaperResearchpeer-review


We model listing decisions in the housing market, and structurally estimate household preference and constraint parameters using comprehensive Danish data. Sellers optimize expected utility from property sales, subject to down-payment constraints, and internalize the effect of their choices on final sale prices and time-on-the-market. The data exhibit variation in the listing price-gains relationship with "demand concavity"; bunching in the sales distribution; and a rising listing propensity with gains. A new fact is that gains and down-payment constraints have interactive effects on listing prices. We find reference-dependence around the nominal purchase price and modest loss-aversion, but our canonical model cannot fully explain the new facts.
Original languageEnglish
Publication date2020
Number of pages54
Publication statusPublished - 2020
EventThe 47th European Finance Association Annual Meeting. EFA 2020 - Virtual from The Aalto University School of Business, Helsinki, Finland
Duration: 20 Aug 202021 Aug 2020
Conference number: 47


ConferenceThe 47th European Finance Association Annual Meeting. EFA 2020
LocationVirtual from The Aalto University School of Business
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