Directed Search in the Housing Market

J. Albrecht, P.A. Gautier, S. Vroman

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

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. 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.
Original languageEnglish
Pages (from-to)218-231
JournalReview of Economic Dynamics
Volume19
Issue numberJanuary
DOIs
Publication statusPublished - 2016

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Housing market
Seller
Directed search
Private information
Limited commitment
Pricing mechanism
Buyers
Reservation

Cite this

Albrecht, J. ; Gautier, P.A. ; Vroman, S. / Directed Search in the Housing Market. In: Review of Economic Dynamics. 2016 ; Vol. 19, No. January. pp. 218-231.
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Directed Search in the Housing Market. / Albrecht, J.; Gautier, P.A.; Vroman, S.

In: Review of Economic Dynamics, Vol. 19, No. January, 2016, p. 218-231.

Research output: Contribution to JournalArticleAcademicpeer-review

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