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Spatial Competition and Shopping Externalities: Evidence from the Housing Market

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  • Geoffrey Turnbull
  • Jonathan Dombrow

Abstract

In search markets, greater spatial concentration of sellers increases price competition. At the same time, though, a greater concentration of sellers can create a shopping externality by attracting more buyers to the site. Using housing sales data, we test for spatial competition and shopping externality effects on prices and marketing time. We find that they reflect both competitive and shopping externality effects from surrounding houses, although the relative strength varies with how fresh the house is in the market, the freshness of surrounding houses, and the phase of the market cycle. New listings have the strongest shopping externality effect on neighboring houses that have been on the market for some time. Vacant houses have their strongest competition effects in the declining market and externality effects in the rising market. Fresh houses on the market reap little benefit from shopping externalities in all phases of the market cycle. Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Geoffrey Turnbull & Jonathan Dombrow, 2006. "Spatial Competition and Shopping Externalities: Evidence from the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 32(4), pages 391-408, June.
    • Handle: RePEc:kap:jrefec:v:32:y:2006:i:4:p:391-408
    DOI: 10.1007/s11146-006-6959-4
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    References listed on IDEAS

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    1. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
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    More about this item

    Keywords

    Spatial competition; Shopping externalities; Housing; D83; R21; R31;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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