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Price competition in the spatial real estate market: Allies or rivals?

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  • Iwata, Shinichiro
  • Sumita, Kazuto
  • Fujisawa, Mieko

Abstract

This paper examines real estate pricing featuring the price response curve, both theoretically and empirically. The Bertrand model with differentiated products suggests that the price response of real estate may differ when properties in the vicinity are priced by an affiliated firm or one's own firm. This is because the firm can maintain the collusive state if real estate prices in the neighborhood are priced by allies, whereas it loses it if prices are priced by rivals. To examine this prediction, a spatial autoregressive model with autoregressive and heteroskedastic disturbances, including a share of allies in the vicinity, is estimated using data on the residential condominium market in central Tokyo. Empirical results provide support for the model prediction.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37438.

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Date of creation: Mar 2012
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Handle: RePEc:pra:mprapa:37438

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Keywords: Real estate prices; Strategic pricing; Spatial econometrics;

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