Anchoring on the listing round-number focal points: evidence from China’s housing market

ABSTRACT

Round-number focal points are important to determine the outcome of negotiations, and the anchoring effect may matter disproportionately whether a listing price reached a round-number threshold. By applying regression discontinuity design method, we find that listing prices under a round-number focal point sell less than the houses list above the threshold. The effect is more pronounced in houses with greater uncertainty.

KEYWORDS:

• Anchoring effect
• round-number
• focal points
• listing prices

JEL CLASSIFICATION:

• G2
• G11
• R21

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ We choose the samples of 2015 and 2016 because of the sample size. Around 2015, a series of favourable real estate policies, such as the central bank’s interest rate cuts and lower mortgage down payment ratio, spawned a hot market, which resulted in almost twice as many transactions in these 2 years as in other years.

² We further develop a series of basic robustness tests, including testing the effects of alternative bandwidths and cut-off points, and testing whether the covariates are not affected by the treatment. The robustness tests confirm that round-number focal points lead to increases in final sale price of housing transactions.

Additional information

Funding

The work was supported by the National Natural Science Foundation of China [71871193, 72033008, 72273118].