The housing market: Consumers struggle to get the price right

January 15, 2013

Consumers systematically mispredict both the selling and purchase prices of other consumers due to a lack of cognitive and emotional connection, according to a new study in the Journal of Consumer Research.

"As sellers, consumers fail to appreciate the extent to which endowment and the prospect of giving up an object and not getting to enjoy its benefits influence other owner valuations. On the other hand, as buyers, consumers fail to realize the extent to which lack of ownership and the prospect of giving up money to purchase an object impact other buyer valuations," write authors Didem Kurt (Boston University) and J. Jeffrey Inman (University of Pittsburgh).

In one study, a group of consumers was given coffee mugs (owners) and asked to predict how much others would ask for the mug. Another group who were not given mugs (buyers) was asked to estimate how much others would pay for the mug. Both groups failed to predict the prices of others in the same role. Owners underestimated the average selling price demanded by other owners, whereas buyers overestimated the average price offered by other buyers by over 20%.

These can have important . For instance, when demand for homes is high in an area, buyers may overestimate how much others are willing to pay for a particular home and place a very high bid, resulting in overpaying. Buyers will suffer from reduced satisfaction with a transaction when they discover that others are actually willing to pay less (or have already paid less) for the same or a similar object. Or, when selling used items of sentimental value, underestimating the selling prices of other owners may lead an owner to sell at a lower price, reducing not only the of the sale but also decreasing the seller's overall satisfaction.

"Consumers rely on both their calculations and feelings when valuing objects for sale. And, since consumers inaccurately assess others' cognitive and , they mispredict how much others value objects. However, the accuracy of their predictions can be improved by helping them appreciate similarities between themselves and others who are in the same situation," the authors conclude.

Explore further: You can look -- but don't touch

More information: Didem Kurt and J. Jeffrey Inman. "Mispredicting Others' Valuations: Self-Other Difference in the Context of Endowment." Journal of Consumer Research: June 2013.

Related Stories

You can look -- but don't touch

January 7, 2009

Consumers are often told that if they break an item, they buy it. But a new study suggests that if they just touch an item for more than a few seconds, they may also end up buying it.

Early product launches: How will consumers respond?

April 19, 2011

A new study in the Journal of Consumer Research explains why consumers often indicate they are willing to pay more for a product that is not yet available—but are reluctant to pay that price when the product is ultimately ...

Selling on eBay? Get higher bids with a red background

July 17, 2012

The color red influences consumers to become more aggressive in online auctions and affects how much they are willing to pay for products as varied as video game consoles and Florida vacation packages, according to a new ...

Recommended for you

From a very old skeleton, new insights on ancient migrations

October 9, 2015

Three years ago, a group of researchers found a cave in Ethiopia with a secret: it held the 4,500-year-old remains of a man, with his head resting on a rock pillow, his hands folded under his face, and stone flake tools surrounding ...

Mexican site yields new details of sacrifice of Spaniards

October 9, 2015

It was one of the worst defeats in one of history's most dramatic conquests: Only a year after Hernan Cortes landed in Mexico, hundreds of people in a Spanish-led convey were captured, sacrificed and apparently eaten.

Ancient genome from Africa sequenced for the first time

October 8, 2015

The first ancient human genome from Africa to be sequenced has revealed that a wave of migration back into Africa from Western Eurasia around 3,000 years ago was up to twice as significant as previously thought, and affected ...

Who you gonna trust? How power affects our faith in others

October 6, 2015

One of the ongoing themes of the current presidential campaign is that Americans are becoming increasingly distrustful of those who walk the corridors of power – Exhibit A being the Republican presidential primary, in which ...


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.