March 25, 2011 6:19 am
Answer: a lot … it’s the psychological effect called anchoring.
For example, researchers asked both professional real estate agents and man-off-the-street amateurs to predict the final selling price of a house.
They were all told that the current tax appraisal value of the house was $135,000.
Then, each respondent was told that the house was listed in one of four prices — ranging from $119,900 to $149,900.
The researchers found a clear positive correlation between list prices and predicted sale prices.
The amateur is responded more to the differences in list prices and the professionals — but even the pros and a $15,000 spread that can only be attributed to the differences in the list prices.
Bottom line: if you’re selling a home beach for the sky with your list price; if you’re buying a home try to ignore the list price and focus on more fundamental values like tax assessments and comparable sales
Source: Priceless, William Poundstone, Hill and Wang Books, 2010
Posted by Ken Homa
Categories: Behavioral Economics, Mktg - Pricing
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