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Strategies for search on the housing market and their implications for price dispersion

  • Tristan-Pierre Maury

    (EDHEC - EDHEC Business School - Edhec)

  • Fabien Tripier

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

When an household needs to change its home, a new house must be bought and the old one must be sold. In order to complete these two transactions, the household can adopt either a sequential or a simultaneous search strategy. In sequential strategies, it first buys (or sells) and only after tries to sell (or buy), to avoid either being homeless or holding two houses, respectively. In the simultaneous strategy, the household tries to buy and sell simultaneously. If the household adopts the simultaneous strategy, it can reduce its search costs, but becomes exposed to the risk of becoming a homeless renter or the owner of two houses. The literature generally considers only the sequential search strategy. However, we show in this article that the simultaneous strategy is (i) generally welfare improving for households, (ii) sometimes the sole equilibrium strategy, and (iii) at the origin of price dispersion on the housing market.

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Paper provided by HAL in its series Working Papers with number hal-00480484.

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Date of creation: 04 May 2010
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Handle: RePEc:hal:wpaper:hal-00480484
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  1. Antonio M. Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England," CESifo Working Paper Series 778, CESifo Group Munich.
  2. Charles Ka Yui Leung & Youngman Chun Fai Leong & Siu Kei Wong, 2005. "Housing Price Dispersion: an empirical investigation," Discussion Papers 00012, Chinese University of Hong Kong, Department of Economics.
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  12. 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 1270-92, December.
  13. John P. Harding & John R. Knight & C.F. Sirmans, 2003. "Estimating Bargaining Effects in Hedonic Models: Evidence from the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 601-622, December.
  14. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2003. "Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(2), pages 269-303, 06.
  15. Jeffrey Fisher & Dean Gatzlaff & David Geltner & Donald Haurin, 2004. "An Analysis of the Determinants of Transaction Frequency of Institutional Commercial Real Estate Investment Property," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(2), pages 239-264, 06.
  16. 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.
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