2. Discuss your reaction for the following anchoring bias scenarios

Suppose you have decided to sell your house and downsize by acquiring a townhouse that you have been eyeing for several years. You do not feel extreme urgency in selling your house, but the associated taxes are eating into your monthly cash flow, and you want to unload the property as soon as possible. Your real estate agent, whom you have known for many years, prices your home at $900,000you are shocked. You paid $250,000 for the home only 15 years ago, and the $900,000 figure is almost too thrilling to believe. You place the house on the market and wait a few months, but you don't receive any nibbles. One day, your real estate agent calls, suggesting that the two of you meet right away. When he arrives, he tells you that PharmaGrowth, a company that moved into town eight years ago in conjunction with its much-publicized initial public offering (IPO), has just declared Chapter 11 bankruptcy. Now, 7,500 people are out of work. Your agent has been in meetings all week with his colleagues, and together they estimate that local real estate prices have taken a hit of about 10 percent across the board. Your agent tells you that you must decide the price at which you want to list your home, based on this new information. You tell him that you will think it over and get back to him shortly.

Question: Assume your house is at the mean in terms of quality and salability. What is your likeliest course of action?

1. You decide to keep your home on the market for $900,000. 2. You decide to lower your price by 5 percent, and ask $855,000. 3. You decide to lower your price by 10 percent, and ask $810,000. 4. You decide to lower your price to $800,000 because you want to be sure that you will get a bid on the house.