The influence of intuition on decision making in property development

Dominique Loesch and Carsten Lausberg

ERES from European Real Estate Society (ERES)

Abstract: Over the last 40 years countless studies have tried to bridge the gap between the neoclassical paradigm of rational behavior and the reality of human decision-making. As we know today heuristics, emotions, and many other factors are involved. Most of the studies are not related to real estate, but behavioral research in this field is catching up quickly. We extend the literature by (1) introducing the factor intuition into the discussion and (2) providing a unique approach to identify the importance of personal preferences on decision-making. We deliberately chose the area of project development because according to the literature de-velopers need intuition, creativity, instinct and the like to be successful. The paper has two main parts. The first part is a literature survey which combines the findings on the role of intuition from both the managerial decision theory and the psychological decision theory. The second part covers our empirical survey that consists of the personality inventory. Preference for intuition and deliberation (PID) by Betsch (2004) and a question-naire. The questions refer to two case studies in which a developer has to decide between two alternatives (to buy vs. not to buy a piece of land; to stop vs. not to stop a development). With the help of a contingency analysis we conclude that the personal preference of a project developer regarding intuition and deliberation partially determines his decision behavior. Alt-hough the sample (35 property developers and a control group of 21 students) is too small for any generalizations, the study helps to understand how important intuition is for decision-making in real estate.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2012-01-01
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