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Dynamic Search in a Non-Stationary Search Environment: An Application to the Beijing Housing Market

Author

Listed:
  • Ying Fan
  • Ziying Fan
  • Yiyi Zhou

Abstract

This paper studies how dynamic changes in the search environment affect consumer search and purchase behavior. We develop a dynamic model that incorporates a non-stationary search environment and propose a feasible estimation procedure to estimate its parameters. We apply our model and estimation procedure to the Beijing housing market, utilizing detailed data on consumers’ complete search records. We show that accounting for dynamics is crucial for accurately estimating search costs. Additionally, we find that search environment dynamics have a significant impact on consumer decisions and welfare. Housing supply policies that alter search environment dynamics—by increasing the number of new listings and slowing down price increases—benefit consumers, primarily by incentivizing longer searches, more property visits, and ultimately leading to purchases that yield higher utility.

Suggested Citation

  • Ying Fan & Ziying Fan & Yiyi Zhou, 2025. "Dynamic Search in a Non-Stationary Search Environment: An Application to the Beijing Housing Market," CESifo Working Paper Series 11709, CESifo.
  • Handle: RePEc:ces:ceswps:_11709
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    References listed on IDEAS

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    1. Keane, Michael P & Wolpin, Kenneth I, 1994. "The Solution and Estimation of Discrete Choice Dynamic Programming Models by Simulation and Interpolation: Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 648-672, November.
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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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