Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67804
Authors: 
Stacey, Derek G.
Year of Publication: 
2012
Series/Report no.: 
Queen's Economics Department Working Paper 1289
Abstract: 
I propose a model of the housing market using a search framework with asymmetric information in which sellers are unable to commit to asking prices announced ex ante. Relaxing the commitment assumption prevents sellers from using price posting as a signalling device to direct buyers' search. Adverse selection and inefficient entry on the demand side then contribute to housing market illiquidity. Real estate agents that can improve the expected quality of a match can segment the market and alleviate information frictions. Even if one endorses the view that real estate agents provide no technological advantage in the matching process, incentive compatible listing contracts are implementable as long as housing is not already sufficiently liquid. The theoretical implications are qualitatively consistent with the empirical observations of real estate brokerage: platform differentiation, endogenous sorting, and listing contract features that reinforce incentive compatibility.
Subjects: 
Housing
Search
Liquidity
Real Estate Agents
JEL: 
D40
D44
D83
R31
Document Type: 
Working Paper

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