Choosing cities: a behavioural economic approach

Marek Banczyk, Joanne Laban and Jason Potts ()
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Marek Banczyk: Columbia University
Joanne Laban: RMIT University
Jason Potts: RMIT University

The Annals of Regional Science, 2018, vol. 61, issue 3, No 2, 463-477

Abstract: Abstract How do people and firms choose to relocate to new cities? We argue that this difficult yet consequential choice is often poorly made, or not made at all, resulting in undermobility and consequent losses in individual utility and aggregate social welfare. We propose a behavioural economic theory of why this happens and the predictable directions in which failure occurs in terms of characteristic biases and heuristics in city choice (including status quo bias, loss aversion, endowment effect, availability heuristics, present bias, social norms, anchoring, elimination heuristics, sunk cost effects, and regret aversion). We examine how cities and their regional context might mitigate this problem by improving information as inputs into choice and by redesigning the choice architecture to embed effective choice heuristics into city search and match databases.

JEL-codes: D13 D70 D80 R1 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00168-018-0872-7

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