Housing adventures: The Hypocrisy in Rationality?
Recently, I went shopping for a new house with my parents and I got called out for my double standards. Well, to be honest, I was having double standards, but that was because I was taking the contrasting view points as both a buyer and a seller.
Conventional wisdom is already hypocritical: as a buyer, you would want to maximise your value by buying at the lowest price possible. At the same time, when it comes your turn to sell your house, you would want to sell at the highest price possible in order to maximise your value. Making things worse, rational thinking in economics also tells us to do the same. This is pretty much encompassed in what is known as Auction Theory. Simply put, in auctions, both sellers and buyers benefit by masking the true value of the item on sale to them. This enables buyers to buy something worth more than what they value it at and enables sellers to sell something for more than what they think it is worth. Now, do note that I am not saying whether such a strategy is Nash or not; rather, these are the basics of how a payoff function works. In fact, in some cases, the Nash Equilibrium tells the buyer to always bid $0, so as to not reveal a speck of information on how much the item is worth. On the other hand, some cases dictate that we bid our value, like in the Vickrey Auction.
So, with how the housing market works, would it be better to be rational but hypocritical or to be irrational but not hypocritical. Well, that really depends on your values and what you value more. Of course, if you only care about getting the house at a good monetary value, then you would likely rather be hypocritical and subsume the appropriate position depending on whether you are a seller or a buyer. But if you do not want to be hypocritical then perhaps you should adopt a more moderate stance between being a buyer and a seller, even if it means losing some monetary value on the house. It really all depends on your value judgement. In fact, I would argue that rationality is rather subjective. Of course, from an economics standpoint, you are being rational if you make decisions based on the Marginalist Principle and choosing the option that you prefer the best. Due to the nature of the subject, being rational is often calculated in some form of monetary value. However, rationality can also be subjective in the sense that while you may not have maximised the monetary value of the house, the value of the house that you lost could have been made up by the utility that you gained in terms of your emotions and the feeling that you did not betray your principles and became hypocritical. Thus, I think that while being rational can entail hypocrisy, you could avoid from being hypocritical while still being totally rational in terms of your own value judgement. Judge things based on what you value, not based on what society dictates to be value (money in this case).
