Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market

39 Pages Posted: 28 Dec 2012

See all articles by Yongheng Deng

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management

Kazuo G. Nishimura

Kyoto University - Institute of Economic Research

Diehang (Della) Zheng

affiliation not provided to SSRN

Multiple version iconThere are 4 versions of this paper

Date Written: December 2012

Abstract

We adopt a multistage search model, in which the home seller's reservation price is determined by her or his opportunity cost, search cost, discount rate and additional market parameters. The model indicates that a greater dispersion in offer prices leads to higher reservation and optimal asking prices. A unique dataset from the Tokyo condominium resale market enables us to test those modeled hypotheses. Empirical results indicate that a one percentage point increase in the standard deviation of submarket transaction prices results in a two‐tenths of a percent increase in the initial asking price and in the final transaction price. Increases in the dispersion of market prices enhance the probabilities of a successful transaction and/or an accelerated sale.

Suggested Citation

Deng, Yongheng and Gabriel, Stuart A. and Nishimura, Kazuo G. and Zheng, Diehang (Della), Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market (December 2012). Real Estate Economics, Vol. 40, pp. S234-S272, 2012. Available at SSRN: https://ssrn.com/abstract=2194275 or http://dx.doi.org/10.1111/j.1540-6229.2012.00347.x

Yongheng Deng (Contact Author)

Wisconsin School of Business, University of Wisconsin-Madison ( email )

4110 Grainger Hall
975 University Avenue
Madison, WI 53706
United States
+1 (608) 262-4865 (Phone)

HOME PAGE: http://https://bus.wisc.edu/faculty/yongheng-deng

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-2922 (Phone)
310-206-5455 (Fax)

HOME PAGE: http://www.anderson.ucla.edu

Kazuo G. Nishimura

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
Japan

Diehang (Della) Zheng

affiliation not provided to SSRN ( email )

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