Information Disclosure in Housing Auctions
26 Pages Posted: 12 Feb 2021
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: Suggested Citation