An optimal strategy for maximizing the expected real-estate selling price: accept or reject an offer?
AbstractMotivated by a real-life situation, we put forward a model and then derive an optimal strategy that maximizes the expected real-estate selling price when one of the only two remaining buyers has already made an offer but the other one is yet to make. Since the seller is not sure whether the other buyer would make a lower or higher offer, and given no recall, the seller needs a strategy to decide whether to accept or reject the first-come offer. The herein derived optimal seller's strategy, which maximizes the expected selling price, is illustrated under several scenarios, such as independent and dependent offers by the two buyers, and for several parametric price distributions.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40694.
Date of creation: 14 Aug 2012
Date of revision:
Real estate; Optimal strategy; Decision theory; Uncertainty; Two-envelope problem;
Find related papers by JEL classification:
- B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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