ABSTRACT
Anchoring is a psychology term describing a cognitive bias where humans tend to rely heavily on a piece of information given initially in the decision-making process. Loss aversion is another essential concept in prospect theory. In cognitive psychology and decision theory, loss aversion means that people have asymmetric preference between avoiding losses and acquiring equivalent gains: winning a dollar contributes less to utility or happiness than losing an equal dollar deducts from utility or happiness. Mental accounting is the cognitive process by which individuals and households organise, evaluate, and keep track of their financial activities. The uniqueness of the housing market demands both the fine-tuning of theories and plenty of replications of classic experiments when applying behavioural models in housing markets. Herd behaviour causes reduction of informativeness. The theory of social comparison is firstly proposed by psychologist Leon Festinger. The theory helps to explain how people rate their opinions or capabilities by comparing themselves with others.
