Buying and Selling Houses in Ireland: Behavioural Economic Evidence for Reform

Abstract

This paper applies behavioural economics to Ireland’s housing transaction system, identifying how systemic features may contribute to biased decision-making and price volatility. It draws on international comparisons and highlights eight cognitive biases that affect buyers and sellers including ambiguity aversion, herding, extrapolation bias, present bias, anchoring, loss aversion, sunk cost fallacy and auction fever. The paper argues that features of Ireland’s system likely exacerbate cognitive biases leading to stress, financial risk and market instability. It considers reforms that would increase transparency, aiming to make transactions fairer, easier and less prone to volatility, while respecting property rights.