Spatial Competition and Shopping Externalities: Evidence from the Housing Market

Posted: 11 Oct 2005

See all articles by Geoffrey K. Turnbull

Geoffrey K. Turnbull

Georgia State University - Department of Economics

Jonathan Dombrow

Independent

Abstract

In search markets, greater spatial concentration of sellers increases price competition. At the same time, though, a greater concentration of sellers can create a shopping externality by attracting more buyers to the site. Using housing sales data, we test for spatial competition and shopping externality effects on prices and marketing time. We find that they reflect both competitive and shopping externality effects from surrounding houses, although the relative strength varies with how fresh the house is in the market, the freshness of surrounding houses, and the phase of the market cycle. New listings have the strongest shopping externality effect on neighboring houses that have been on the market for some time. Vacant houses have their strongest competition effects in the declining market and externality effects in the rising market. Fresh houses on the market reap little benefit from shopping externalities in all phases of the market cycle.

Keywords: spatial competition, shopping externalities, housing

JEL Classification: D83, R21, R31

Suggested Citation

Turnbull, Geoffrey K. and Dombrow, Jonathan, Spatial Competition and Shopping Externalities: Evidence from the Housing Market. Journal of Real Estate Finance and Economics, Vol. 32, No. 4, 2006, Available at SSRN: https://ssrn.com/abstract=813866

Geoffrey K. Turnbull (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-651-0419 (Phone)
404-651-2737 (Fax)

Jonathan Dombrow

Independent ( email )

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