The Effect of a Special Interest Group on Apartment Price Collusion

Abstract

This paper examines the effect of collusion by a special interest group (Association of the Resident Housewives, ARH) in the apartment market between 2006 and 2007 in Korea. Using the Difference-In-Difference (DID) design and carefully matching the apartments, it is estimated that every instance of collusion results in an increase of from KRW 7.2 to 40.3 million in the apartment price. The amount of increase varies by districts and apartment unit characteristics. The result in this paper shows that the effects of collusion explain the cause of a rapid rise in the price of apartment between 2006 and 2007. This paper contributes to the collusion literature by closely examining how a special interest group (ARH) affects price through the collusion.

Keywords: Apartment price, Collusion, Special interest group, Difference in Difference (DID), Bidding ring

JEL Classification: C5, D4