Directed Search in the Housing Market
By James Albrecht, Pieter A. Gautier, Susan Vroman. Social Science Research Network, 2010
162 citations recorded by the source corpus.
In this paper, we present a directed search model of the housing market. The pricing mechanism we analyze reflects the way houses are bought and sold in the United States. Our model is consistent with the observation that houses are sometimes sold above, sometimes below and sometimes at the asking price. We consider two versions of our model. In the first version, all sellers have the same reservation value. In the second version, there are two seller types, and type is private information. For both versions, we characterize the equilibrium of the game played by buyers and sellers, and we prove efficiency. Our model offers a new way to look at the housing market from a search-theoretic perspective. In addition, we contribute to the directed search literature by considering a model in which the asking price (i) entails only limited commitment and (ii) has the potential to signal seller type.
Subfields: Economics and Econometrics, Management Science and Operations Research, Marketing
View Paper: https://www.semanticscholar.org/paper/ff9ae74d2c9ac0ac464e3e89af767eefb3247c92
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In Economics and Econometrics
- Adam M. Guren
- W. Strange
- Lu Han
- Gilles Duranton
- Stuart S. Rosenthal
- William R. Kerr
- Edward L. Glaeser
- Pierre-Philippe Combes
In Management Science and Operations Research
In Marketing
Citations in the corpus
- House Price Momentum and Strategic Complementarity (2018, background): “Third, a house’s relative list price may be a signal of seller type, such as an unwillingness to negotiate (Albrecht et al., 2016).”
- HOUSE PRICES, SALES, AND TIME ON THE MARKET: A SEARCH-THEORETIC FRAMEWORK (2013, unknown): “…it is captured in an ad-hoc way because the per capita supply of houses has a 4See, for instance, Yavaş (1992), Williams (1995), Arnold (1999), Albrecht, Anderson, Smith, and Vroman (2007), Yui and Zhang (2007), Hendel, Nevo, and Ortalo-Magné (2009), and Albrecht, Gautier, and Vroman (2010).”
- What is the role of the asking price for a house (2016, methodology): “Formally, we suppose: Assumption 1 (weak buyer bargaining power): ≥ 1 - c/[[xH - xL]] 11 By making this assumption, our approach differs sharply from Albrecht et al (2012).”