An Empirical Two-sided Equilibrium Search Model of the Real Estate Market
نویسنده
چکیده
Two-sided search is an important feature of the Real Estate market (REM). Existing empirical equilibrium search models assume that only one side of the market searches and, thus, can not adequately describe this market. We specify a two-sided equilibrium search model of the REM that incorporates five very important characteristics of the REM: a) buyers' and sellers' search behavior, b) heterogeneity in agents' motivation to trade, c) transaction costs, d) a trading mechanism with posting prices and bargaining, and e) the availability of an online advertising technology. The model is estimated using Maximum Likelihood methods and Multiple Listing Services data. We use the estimated model to analyze how information displayed in real estate ads on the internet affect prices and agent’s search behavior. Our estimates suggest that, on average, only 3% of the relevant information tha t home-buyers collect before making a purchase decision is obtained through online ads. Furthermore, we find that improvements in online information displayed by Real Estate ads decrease equilibrium prices but increase the time that a property stays on the market.
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