Preference Construction and Housing Choice: The Role of the Estate Agent

Abstract

It is firmly established that human judgement and decision making can fall short of the standard required in the Behavioral Decision Theory of von Neumann and Morgenstern (1947). Consumers in particular seem vulnerable to systematic errors of judgement which affect their choice behaviour, opening the possibility that others might manipulate their preference formation (Thaler, 1980; Simonson and Tversky, 1992). This paper uses several economic experiments to investigate the nature of biases in housing search and choice, considering in particular the role of estate agents as choice architects, influencing behaviour and resulting in predictable biases in outcomes. The study indicates that consumers are vulnerable to several areas of manipulation consistent with existing literature in consumer choice, and evidence of a new bias, labelled choice pollution effect.