Are We Humans or Are We Econs? Effect of Sunk Cost Fallacy on Real Estate Development Decisions

摘要

In this case, we examine the role of behavioral biases in real estate development by focusing on a particular anomaly, namely, sunk cost fallacy. We use land and house selling prices in Beijing, China between 2003 and 2013, which offers a unique opportunity to analyze the effects of human factors on the decisionmaking process in real estate development. This case can be used as an introduction to behavioral economics and its application to real estate research. It can also facilitate discussions on real estate development, urban economics, and quantitative research methods in real estate analysis.