Quality, Price, and Time-on-Market
12 Pages Posted: 16 Apr 2021
Date Written: July 10, 2018
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: Suggested Citation