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Price Dispersion in the Housing Market: The Role of Bargaining and Search Costs

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  • Gaetano Lisi

    (University of Cassino - Creativity and Motivations (CreaM) Economic Center)

Abstract

This paper develops a matching model à la Pissarides (2000) in order to explain a basic fact of housing markets: price dispersion. The variance in house prices is basically due to both the ex-ante heterogeneity of the parties (i.e., bargaining power, tastes, asymmetric information) and the search costs of buyers and sellers. In fact, sellers and buyers spend time and money before concluding the deal. Furthermore, the house price is substantially determined by bargaining between the parties. These factors affect the selling price and lead to price dispersion. This simple theoretical model is able to take these distinctive features of the housing markets into account.

Suggested Citation

  • Gaetano Lisi, 2011. "Price Dispersion in the Housing Market: The Role of Bargaining and Search Costs," Working Papers hal-00628323, HAL.
    • Handle: RePEc:hal:wpaper:hal-00628323
    Note: View the original document on HAL open archive server: https://hal.science/hal-00628323
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    References listed on IDEAS

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    12. Gaetano Lisi, 2011. "The Hedonic Price Function in a Matching Model of Housing Market," Economics Bulletin, AccessEcon, vol. 31(3), pages 2347-2355.
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