The effect of context and the level of decision maker training on the perception of a property's probable sale price

Abstract

This paper explores how property market participants engage in the process of making value judgements. More specifically it investigates how being exposed to a residential property impacts the perception of the probable selling price of an unrelated subsequent property and the influence of decision makers' level of training on these value judgements. Property literature suggests that the use of heuristics (or cognitive short cuts), in particular the effect of anchoring and adjustment, may affect value judgements of a subsequent property. The marketing literature provides evidence of the direction of these adjustments by way of assimilation and contrast effects. The effects of the amount of market knowledge and experience have also been shown to affect the use of heuristics but the level of training has not previously been isolated. This paper consists of an experiment comprising 225 Undergraduate Property students from the University of Auckland, New Zealand. The results indicate that the context and the use of heuristics do affect value judgements. More specifically they suggest that contrast or assimilation effects may result depending on the level of prior training of the decision maker, the comparability of the properties being examined and the level of uncertainty surrounding the estimation of the perceived sales price.

Keywords:

• context effects
• assimilation effects
• contrast effects
• decision maker training
• value judgements

Notes

1. While few papers have explicitly explored the link between the context effects discussed in the marketing literature and the framing effects discussed in property literature, both streams of research link back to the work conducted by Tversky and Kahneman (1974).

2. This has also been termed as a judgement contrast (Schwartz & Bless, 1992).

3. Where the moderator variable (in this instance level of training) is a qualitative variable that affects the direction and/or strength of the relationship between the contextual prime and the dependent variable (most probable sale price (Baron & Kenny, 1986).

4. Sample sizes for some of the detailed models are slightly smaller due to the subjects' non‐response on some variables.

5. The scale used in this research was a slight adaptation of the scale developed by Swinyard (1993). The key difference being an adaptation of Swinyard's seven‐point semantic differential scale to a 10‐point scale. The reason for the adaptation to a 10‐point scale was to retain consistency in scaling with other questions included in the experiment.

6. This approach uses t‐tests to perform all pairwise comparisons between group means.

7. Swinyard (1993) reported a similar alpha of 0.82 in his experiment.

8. The assumptions of these t‐tests were checked and found to be met.