Evidence of Buyer Bargaining Power in the Stockholm Residential Real Estate Market

Abstract

This study investigates whether uninformed buyers pay higher prices for single-family houses than do other buyers and tests whether the bargaining power increases with information. Data on real estate prices and attributes is examined, as well as household characteristics and buying process from Stockholm. The results suggest that uninformed buyers pay a higher price than informed buyers do. Bargaining power is not found to be weaker for a first-time buyer but it is weaker if the household has participated in several biddings and lost. Repeated bidding and losing households are more willing to increase their reservation price and pay a higher overall price compared to other households.

Keywords: residential, Stockholm, bidding, bargaining power