Market Thinness, List Price Revisions and Time to Sell: Evidence from a large-scale housing dataset
AbstractThis paper uses a large dataset, covering more than 70% of the Dutch housing market, to analyze the relationship between market thinness, price setting behavior and time to sell. Our findings confirm the typical result that overpricing increases the time on market. In addition, we find evidence of quicker list price reductions suggesting that overpricing is part of a strategy to search for the opportunity of high revenues and to learn about the market. Moreover, we are able to confirm the theory put forward by Lazear (1986) on the relation between atypical goods and the speed of price adjustments. Sellers of atypical houses are more uncertain about the price buyers want to pay and take time to learn about the market, thereby increasing the expected time on market and the time to price revisions. Market liquidity has a positive, i.e. shortening, effect on the time to sale and leads to quicker price revisions due to the increased opportunities for learning.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 176.
Date of creation: May 2008
Date of revision:
market liquidity; pricing strategies; marketing time; overpricing; housing;
Find related papers by JEL classification:
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-MAC-2008-05-31 (Macroeconomics)
- NEP-MKT-2008-05-31 (Marketing)
- NEP-URE-2008-05-31 (Urban & Real Estate Economics)
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