Author(s): Udayan Karnatak
The real estate market is similar to stock markets in one aspect. Financial markets and real estate markets have irrational participants and under incomplete information, these participants get affected by the heuristics also. In our study, we have chosen real estate markets to study the two heuristics/cognitions inter-relation and connection. One is anchoring bias and another is mental accounting. The questionnaire is administered to real estate buyers/potential buyers by using a purposive and snowball sampling method. The logistic regression technique was used to find the connection between anchoring and the mental-accounting bias of the real estate buyers/potential buyers. The results show that the change in probability of happening of anchoring bias can be explained by mental accounting. This showcase the simultaneous existence of these two behavioral biases in home-buyers that validate the view that human mind depends on heuristics/cognitions to maximize their expected utility in an uncertain environment.