Information Disclosure in Housing Auctions

26 Pages Posted: 12 Feb 2021

See all articles by Alina Arefeva

Alina Arefeva

UW Madison - Wisconsin School Business

Delong Meng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: January 24, 2021

Abstract

We study the optimal selling mechanism and information disclosure policy for a house seller. The seller can select any selling mechanism, including an auction, and release additional information about the house to buyers. Release of information adjusts the buyers' values and bids. We find that the optimal mechanism is a combination of the optimal auction and full information disclosure. But if the seller uses a second-price auction instead, concealing additional information about the house may be optimal for her. Moreover, the seller can extract buyers' private value adjustments by selling them contracts similar to European call options.

Keywords: house selling, bidding wars, auctions, optimal mechanism, information disclosure, microstructure, institutions

JEL Classification: R31, D82, D44

Suggested Citation

Arefeva, Alina and Meng, Delong, Information Disclosure in Housing Auctions (January 24, 2021). Available at SSRN: https://ssrn.com/abstract=3772307 or http://dx.doi.org/10.2139/ssrn.3772307

Alina Arefeva (Contact Author)

UW Madison - Wisconsin School Business ( email )

975 University Avenue
Madison, WI 53706
United States

HOME PAGE: http://www.aarefeva.com

Delong Meng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

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