Behavioural Economics and House Prices: A Literature Review

Richard Whittle, Thomas Davies, Matthew Gobey, John Simister


This paper investigates previous research, to examine ways in which behavioural economics helps us to understand how house prices are determined.  In several respects, behavioural economics seems to be an improvement over neoclassical economics, regarding variations and trends in house prices.  This paper analyses theoretical and empirical evidence – investigating topics such as loss aversion, house price bubbles, and herd behaviour.  Historical perspectives (including the 2007/8 global financial crisis) are included, as well as differences between countries.

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