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Directed Search in the Housing Market

Author

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  • Albrecht, James

    (Georgetown University)

  • Gautier, Pieter A.

    (Vrije Universiteit Amsterdam)

  • Vroman, Susan

    (Georgetown University)

Abstract

In this paper, we present a directed search model of the housing market. The pricing mechanism we analyze reflects the way houses are bought and sold in the United States. Our model is consistent with the observation that houses are sometimes sold above, sometimes below and sometimes at the asking price. We consider two versions of our model. In the first version, all sellers have the same reservation value. In the second version, there are two seller types, and type is private information. For both versions, we characterize the equilibrium of the game played by buyers and sellers, and we prove efficiency. Our model offers a new way to look at the housing market from a search-theoretic perspective. In addition, we contribute to the directed search literature by considering a model in which the asking price (i) entails only limited commitment and (ii) has the potential to signal seller type.

Suggested Citation

  • Albrecht, James & Gautier, Pieter A. & Vroman, Susan, 2009. "Directed Search in the Housing Market," IZA Discussion Papers 4671, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4671
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    References listed on IDEAS

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    More about this item

    Keywords

    directed search; housing;

    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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