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Housing search frictions and optimal search

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  • Koster, Hans R.A.
  • van Ommeren, Jos

Abstract

By deriving a ‘housing market Hosios condition’, we show that the main conclusions of the seminal paper on housing search frictions by Wheaton (1990) were erroneously derived. We show that households may search too much, optimally, or too little, which is in contrast to the paper’s conclusion that they always search too little. Furthermore, we show that exogenous increases in housing vacancies always have a negative effect on house prices, given standard assumptions.

Suggested Citation

  • Koster, Hans R.A. & van Ommeren, Jos, 2020. "Housing search frictions and optimal search," Economics Letters, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300240
    DOI: 10.1016/j.econlet.2020.108980
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    References listed on IDEAS

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    1. Hans R. A. Koster & Jos van Ommeren, 2019. "Place-Based Policies and the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 400-414, July.
    2. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-355, April.
    3. Merlo, Antonio & Ortalo-Magne, Francois, 2004. "Bargaining over residential real estate: evidence from England," Journal of Urban Economics, Elsevier, vol. 56(2), pages 192-216, September.
    4. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    5. Adam M. Guren, 2018. "House Price Momentum and Strategic Complementarity," Journal of Political Economy, University of Chicago Press, vol. 126(3), pages 1172-1218.
    6. John P. Harding & Stuart S. Rosenthal & C. F. Sirmans, 2003. "Estimating Bargaining Power in the Market for Existing Homes," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 178-188, February.
    7. Lundborg, Per & Skedinger, Per, 1999. "Transaction Taxes in a Search Model of the Housing Market," Journal of Urban Economics, Elsevier, vol. 45(2), pages 385-399, March.
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    Cited by:

    1. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2023. "Search Frictions in Rental Markets: Evidence from Urban China," Working Paper Series 23/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.

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    More about this item

    Keywords

    Housing market; Search frictions; Optimal search;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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