The Effect of Pricing Strategy on Home Selection and Transaction Prices: An Investigation of the Left-Most Digit Effect

Eli Beracha and Michael Seiler ()

Journal of Housing Research, 2015, vol. 24, issue 2, 147-161

Abstract: In this study, we examine whether homebuyers favor homes associated with just below pricing strategies or those with rounded prices (e.g., $199,900 vs. $200,000). The inclination for just below pricing allows sellers that use just below pricing to set a higher asking price without driving away potential buyers. Rounded priced homes, on the other hand, sell significantly faster and at a smaller discount from list price compared with just below priced homes. We find that the just below pricing strategy yields the highest transaction price relative to the true underlying home value. This suggests sellers exploit buyers' preference for just below priced homes with a higher initial listing price that outweighs the lower discount and shorter time on market associated with similar round priced homes, making just below pricing the more effective pricing strategy.

Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10835547.2015.12092101 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Effect of Pricing Strategy on Home Selection and Transaction Prices: An Investigation of the Left-Most Digit Effect (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rjrhxx:v:24:y:2015:i:2:p:147-161

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjrh20

DOI: 10.1080/10835547.2015.12092101

Access Statistics for this article

Journal of Housing Research is currently edited by Kimberly Goodwin

More articles in Journal of Housing Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().