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Directed Search in the Housing Market

Author

Listed:
  • Susan Vroman

    (Georgetown University)

  • Pieter Gautier

    (Free University of Amsterdam)

  • James Albrecht

    (Georgetown University)

Abstract

We consider a housing market with large numbers of buyers and sellers. Sellers differ in their reservation prices; buyers are ex ante identical. In the first stage of the game, each seller posts an asking price. Next, each buyer, after observing all asking prices, chooses a house to visit. Upon visiting a house, a buyer observes an idiosyncratic value, x, the maximum amount he would be willing to pay for the house. The buyer then decides whether to make a bid on the house and, if so, at what level. If only one buyer makes an offer on a house, the buyer and seller negotiate over the price with the seller’s asking price as a maximum. If more than one buyer makes an offer on a house, the buyers can engage in Bertrand competition. We analyze the equilibrium of this directed search game.

Suggested Citation

  • Susan Vroman & Pieter Gautier & James Albrecht, 2007. "Directed Search in the Housing Market," 2007 Meeting Papers 372, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:372
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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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