Behavioural Economics and Housing Decisions

Course description:

Decisions that are made less frequently with limited experience are more prone to behavioural biases and heuristics. This is particularly true for housing decisions. It is, therefore, important to study the applications of behavioural science in housing decision making.

This course covers six important housing issues, that is, tenure decision, gentrification, place attachment, housing bubbles, housing wealth, and residential satisfaction.  Using experimental and field data, the effects of six behavioural biases and heuristics (i.e., anchoring and reference dependence, loss aversion, mental accounting, endowment effect, herd behaviours, and social comparison) on these housing decisions will be discussed.  A case approach is adopted by using a real case for each topic. Data sets and suggested answers are provided; information on econometric methods to analyse the case data is also included.  The cases come from the UK, USA, and China. Background information is given in each case to facilitate the understanding of case data and question, as well as the discussion of results.

Syllabus:

  1. Lecture 1 Six Housing Questions (PPTs, Readings)    
  2. Lecture 2 Behavioural Science Toolbox (PPTs, Readings)     
  3. Lecture 3 Housing Provident Fund and Homeownership (PPTs, Data set, Readings)
  4. Lecture 4 Mega-events and Gentrification (PPTs, Data set, Readings, Questionnaire)
  5. Lecture 5 Endowment Effect and House Price Determination (PPTs, Data set, Reading)   
  6. Lecture 6 Market Sentiment and Housing Bubbles (PPTs, Data set, Readings)         
  7. Lecture 7 Housing Wealth and Energy Consumption (PPTs, Data set, Readings)       
  8. Lecture 8 Social Comparison and Residential Satisfaction (PPTs, Data set, Readings)          

Textbooks:

  1. Helen X. H. Bao. Behavioural Science and Housing Decision Making: A Case Study Approach, London, Routledge, ISBN: 978-0-367-13576-8 (paperback) and 978-0-367-13575-1 (hardback). March 2020.
  2. Wilkinson, N., Klaes, M., 2012. An introduction to behavioral economics, 2nd ed. Palgrave Macmillan, Basingstoke.

Reference readings:

  1. Kahneman, D., 2011. Thinking, fast and slow. Allen Lane, London.
  2. Shiller, R.J., 2000. Irrational exuberance. Princeton University Press, Princeton, N.J. ; Chichester.
  3. Thaler, R.H., Sunstein, C.R., 2008. Nudge: improving decisions about health, wealth, and happiness. Yale University Press, New Haven, Conn. ; London.