An Empirical Study on the Effect of Respondent Bias in PSM : Case in Apartment Pricing

Abstract

PSM is widely used pricing tool in field by the reason of data collection convenience and analytical intuitiveness. However, In high involvement environment, strategic respondent bias influence in reducing the price. By using 3 empirical cases of LH apartment for sale, We found that latent consumers' recognition of the range of acceptable and the range of optimal price are lower than real estate agent representative respondents'. This phenomenon is considered loss aversion effect of prospect theory to reduce loss by reducing price, and more influenced in high involvement situation than latent consumer respondents'. Also we found PSM result using real estate representative data is more useful in real market than latent consumers data distorted by loss aversion effects. The meaning of this study is finding some limitation in PSM using consumer data generally used. In further study, development of PSM measurement tool to minimize the effect of strategic bias are need to be studied. Also some new approaches in reinterpretation of the range of acceptable price and the range of optimal price are need to be followed.