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Faculty of Economics

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Baddeley, M.

Social Influence and Household Decision-Making: A Behavioural Analysis of Housing Demand


Abstract: Housing markets are subject to many interrelated sources of instability on both a microeconomic and macroeconomic scale. Housing decisions of different individuals will be interdependent, generating non-linearities, discontinuities and feedback effects. This paper focuses in on some behavioural factors that contribute to complexity in housing demand. In particular, the impact of herding and social influence is captured using a model incorporating the impact of social information on willingness to pay. This model is tested in an experimental context and this experimental evidence confirms first, that social information has a statistically significant impact and, second, this impact is determined by a person’s individual characteristics including gender and personality traits.

Keywords: Housing markets, herding, social influence, behavioural economics

JEL Codes: D70 D83 D85 R21


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