TY - JOUR
T1 - Does owners’ purchase price affect rent offered? Experimental evidence
AU - Hirota, Shinichi
AU - Suzuki-Löffelholz, Kumi
AU - Udagawa, Daisuke
N1 - Funding Information:
We are grateful to Michael Seiler (the associate editor) and an anonymous reviewer for valuable comments and suggestions. We thank the participants at the Meeting of the Japanese Economic Association and the Experimental Finance Conference 2015 (EF2015) as well as the seminar participants at Aoyama Gakuin University, Hokkaido University, Nihon University, and Osaka University. We also thank Fumihiko Hiruma, Kohei Kawamura, Satoshi Kawanishi, Dai Uesugi, and Leonid Yoffe for their helpful suggestions and Tomoaki Nishihata for his assistance in conducting the experiments. This work is part of the project, “Fudosan kakaku no keisei katei ni kansuru jikken kenkyu [An experimental study on the price formation process of real estate]”, conducted at the Policy Research Institute for Land, Infrastructure, Transport and Tourism (PRILIT). An overview of the overall project is provided in the PRILIT research report No. 84 (in Japanese). This work was also supported by JSPS KAKENHI (Grant nos. 23530399 , 26590052 , 17K03820 , and 15H01958 ). We also gratefully acknowledge the financial support provided by the Seimeikai Foundation .
Funding Information:
We are grateful to Michael Seiler (the associate editor) and an anonymous reviewer for valuable comments and suggestions. We thank the participants at the Meeting of the Japanese Economic Association and the Experimental Finance Conference 2015 (EF2015) as well as the seminar participants at Aoyama Gakuin University, Hokkaido University, Nihon University, and Osaka University. We also thank Fumihiko Hiruma, Kohei Kawamura, Satoshi Kawanishi, Dai Uesugi, and Leonid Yoffe for their helpful suggestions and Tomoaki Nishihata for his assistance in conducting the experiments. This work is part of the project, ?Fudosan kakaku no keisei katei ni kansuru jikken kenkyu [An experimental study on the price formation process of real estate]?, conducted at the Policy Research Institute for Land, Infrastructure, Transport and Tourism (PRILIT). An overview of the overall project is provided in the PRILIT research report No. 84 (in Japanese). This work was also supported by JSPS KAKENHI (Grant nos. 23530399, 26590052, 17K03820, and 15H01958). We also gratefully acknowledge the financial support provided by the Seimeikai Foundation.
PY - 2020/3
Y1 - 2020/3
N2 - In standard economic theory, rent determines real estate price; however, we hypothesize that in behavioral economics, real estate price affects the rent offered. We conduct laboratory experiments where a real estate market opens before a rental market and examine whether owners’ purchase price influences their rent-offering behavior. We find that the higher the purchase price, the higher the rent offered. We also confirm that higher contracted rents lead to higher prices in subsequent real estate markets. This suggests a positive interaction between real estate prices and rents in the real economy, which can explain the acceleration of price increases often observed in real estate markets.
AB - In standard economic theory, rent determines real estate price; however, we hypothesize that in behavioral economics, real estate price affects the rent offered. We conduct laboratory experiments where a real estate market opens before a rental market and examine whether owners’ purchase price influences their rent-offering behavior. We find that the higher the purchase price, the higher the rent offered. We also confirm that higher contracted rents lead to higher prices in subsequent real estate markets. This suggests a positive interaction between real estate prices and rents in the real economy, which can explain the acceleration of price increases often observed in real estate markets.
KW - Behavioral economics
KW - Laboratory experiment
KW - Real estate prices
KW - Rents
KW - Sunk cost
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U2 - 10.1016/j.jbef.2019.100260
DO - 10.1016/j.jbef.2019.100260
M3 - Article
AN - SCOPUS:85077927891
VL - 25
JO - Journal of Behavioral and Experimental Finance
JF - Journal of Behavioral and Experimental Finance
SN - 2214-6350
M1 - 100260
ER -