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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Mental Accounting in the Housing Market |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 453 |
| ISSN | 1424-0459 |
| Date | 2009 |
| Abstract Text | We identify a consumer bias with regard to different sources of debt-financing. Less salient debt may generate psychological benefits. This should be weighed against the possible economic costs of a suboptimal capital structure, but low levels of financial literacy make it unlikely that all households perceive the full economic costs. As a result there is a bias in favour of less salient debt. In a market with limited scope for arbitrage this consumer bias is likely to generate inefficiencies. We examine such a market in both theory and practice. The predictions of our model are given strong support by market data. |
| Official URL | http://www.econ.uzh.ch/wp.html |
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