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An optimal strategy for maximizing the expected real-estate selling price: accept or reject an offer?

  • Egozcue, Martin
  • Fuentes García, Luis
  • Zitikis, Ricardas
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    Motivated 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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    File URL: http://mpra.ub.uni-muenchen.de/40694/1/MPRA_paper_40694.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40694.

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    Date of creation: 14 Aug 2012
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    Handle: RePEc:pra:mprapa:40694
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    1. Tapan Biswas & Jolian Mchardy, 2012. "Asking Price And Price Discounts: The Strategy Of Selling An Asset Under Price Uncertainty," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 4(1), pages 17-37, June.
    2. Anglin, Paul M., 2004. "How long does it take to buy one house and sell another?," Journal of Housing Economics, Elsevier, vol. 13(2), pages 87-100, June.
    3. S. Christian Albright, 1977. "A Bayesian Approach to a Generalized House Selling Problem," Management Science, INFORMS, vol. 24(4), pages 432-440, December.
    4. Ping Cheng & Zhenguo Lin & Yingchun Liu, 2008. "A Model of Time-on-Market and Real Estate Price Under Sequential Search with Recall," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 813-843, December.
    5. Michael A. Arnold, 1999. "Search, Bargaining and Optimal Asking Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(3), pages 453-481.
    6. Anglin, Paul M & Rutherford, Ronald & Springer, Thomas M, 2003. "The Trade-Off Between the Selling Price of Residential Properties and Time-on-the-Market: The Impact of Price Setting," The Journal of Real Estate Finance and Economics, Springer, vol. 26(1), pages 95-111, January.
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