Price‐knowledge‐induced bias: a cross‐cultural comparison

Abstract

Explains that bias in human problem‐solving behaviour may sometimes conflict with the assumptions that underlie normative models of valuation. Possibilities include faulty perceptions of the task, routinized valuation procedures that rely heavily on pending sale price‐knowledge and reliance on innate and distorting problem‐solving heuristics. Describes an experiment conducted with appraisers in the USA and valuers in the UK to investigate the impact of price knowledge on the process of valuation and the search and selection of comparable sales. Concludes that both appraisers and valuers can be subject to price‐knowledge bias, reflected in the choice of the less than “best” comparables and in the actual value estimate. Discusses how cultural differences in the appraisal and valuation processes, especially in the transparency of comparables adjustments, help to explain these effects.