Directed Search in the Housing Market

45 Pages Posted: 4 Jan 2010

See all articles by James Albrecht

James Albrecht

Georgetown University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Pieter A. Gautier

Free University of Amsterdam; Tinbergen Institute Amsterdam (TIA); IZA Institute of Labor Economics

Susan Vroman

Georgetown University; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

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.

Keywords: directed search, housing

JEL Classification: D83, R31

Suggested Citation

Albrecht, James W. and Gautier, Pieter A. and Vroman, Susan B., Directed Search in the Housing Market. IZA Discussion Paper No. 4671. Available at SSRN: https://ssrn.com/abstract=1530675

James W. Albrecht (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-6105 (Phone)
202-687-6102 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Pieter A. Gautier

Free University of Amsterdam ( email )

Amsterdam, ND North Holland
Netherlands

Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Susan B. Vroman

Georgetown University ( email )

Washington, DC 20057
United States
202-687-6024 (Phone)
202-687-6102 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
59
Abstract Views
490
rank
169,867
PlumX Metrics