Quality, Price, and Time-on-Market

12 Pages Posted: 16 Apr 2021

See all articles by Jordan Martel

Jordan Martel

Indiana University Bloomington, Kelley School of Business

Date Written: July 10, 2018

Abstract

Time-on-market is often interpreted as a negative signal of an asset's quality. The lengthier the time-on-market, the greater the probability that past buyers arrived, observed some undesirable quality, and chose not to buy. In this paper, I propose a simple model of quality, price, and time-on-market. The model yields closed-form expressions for beliefs, prices, and rates of sale. To demonstrate the accessibility of the model, I work out simple comparative statics for time-on-market and sale price and extend the model by giving the seller a valuable outside option.

Keywords: Search, Learning, Time-on-Market, Duration Dependence

JEL Classification: D83

Suggested Citation

Martel, Jordan, Quality, Price, and Time-on-Market (July 10, 2018). Economics Letters, Vol. 171, No. 1, 2018, Available at SSRN: https://ssrn.com/abstract=3823579

Jordan Martel (Contact Author)

Indiana University Bloomington, Kelley School of Business ( email )

1275 E 10th St
Hodge Hall
Bloomington, IN 47405
United States

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

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