Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 798: Mental Accounting in the Housing Market

Johan Almenberg () and Artashes Karapetyan
Additional contact information
Johan Almenberg: Research Institute of Industrial Economics (IFN), Postal: and Stockholm School of Economics
Artashes Karapetyan: Empirical Institute of Economics and SFI, Postal: University of Z├╝rich, Switzerland

Abstract: We use a survey to 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 sub-optimal 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.

Keywords: Household Finance; Mental Accounting; Co-op; Capital Structure

JEL-codes: D12; G14; G21; G32

44 pages, June 4, 2009

Full text files

wp798.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:36.