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Time-on-the-Market as a Sign of Quality

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Author Info
Taylor, Curtis R

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Abstract

The inferences a prospective home buyer can make about the quality of a house from the amount of time it spends on the market and the seller"s optimal strategy in light of these inferences are investigated. Depending upon the information structure, the seller may have an incentive to post an inordinately high initial price (in order to "dampen" the signal transmitted to future prospective buyers) or an inordinately low initial price (in order to make an early sale and avoid consumer "herding"). It is shown that the sellers of high-quality homes do best when inspection outcomes are publicly recorded and do worst when inspection outcomes are not public and the price history is not observable. Costly inspections create more adverse selection but deter consumer herding. Copyright 1999 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 66 (1999)
Issue (Month): 3 (July)
Pages: 555-78
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Handle: RePEc:bla:restud:v:66:y:1999:i:3:p:555-78

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527

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  3. Bose, Subir & Orosel, Gerhard O & Ottaviani, Marco & Vesterlund, Lise, 2005. "Dynamic Monopoly Pricing and Herding," CEPR Discussion Papers 5003, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Vladimir A. Karamychev, 2000. "Cycles and Multiple Equilibria in the Market for Durable Lemons," Econometric Society World Congress 2000 Contributed Papers 0876, Econometric Society. [Downloadable!]
  5. Antonio Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England (Third Version)," PIER Working Paper Archive 04-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2002. [Downloadable!]
  6. Maarten C.W. Janssen & Vladimir Karamychev, 2000. "Continuous Time Trading in Markets with Adverse Selection," Tinbergen Institute Discussion Papers 00-109/1, Tinbergen Institute. [Downloadable!]
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  9. Charles Ka Yui Leung & Youngman Chun Fai Leong & Ida Yin Sze Chan, 2002. "TOM: Why Isn’t Price Enough?," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 91-115. [Downloadable!] (restricted)
  10. Rob van der Noll, 2006. "Competition for a Prize," Tinbergen Institute Discussion Papers 06-013/1, Tinbergen Institute. [Downloadable!]
  11. Paulo Klinger Monteiro & José Luis Moraga-González, 2003. "We Sold a Million Units -- The Role of Advertising Past-Sales," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 57(2), April. [Downloadable!]
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