Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 718:
Mental Accounting in the Housing Market

Johan Almenberg () and Artashes Karapetyan

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.

Keywords: salience; housing market; household finance; co-op; capital structure; (follow links to similar papers)

JEL-Codes: D12; G14; G21; G32; (follow links to similar papers)

43 pages, May 10, 2009, Revised August 28, 2010

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