Normative versus Heuristic Models of Residential Search Behavior: An Empirical Comparison

In this paper is reported an empirical comparison between two models of residential search behavior: a normative stopping model derived by Phipps and Laverty and a heuristic model proposed by Meyer. This normative rule is exemplary of a large class of models in economics in which it is assumed that individuals act as if they maximize rational expectations when making sequential decisions. The heuristic rule, in contrast, is exemplary of descriptive models in psychology in which it is assumed that such decisions are better characterized by a more simplified cognitive algebra. A comparison is made of the ability of the models to explain the behavior of subjects in an apartment search game. The results tend to favor the heuristic model: stopping appears best characterized by a set of individual-specific utility-difference thresholds. Implications of the results for the role of normative versus descriptive models in the development of residential search theory are discussed.

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