Market Thinness, List Price Revisions and Time to Sell: Evidence from a large-scale housing dataset

Marco Hoeberichts (), Maarten van Rooij () and Arjen Siegmann ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: This paper uses a large dataset, covering more than 70% of the Dutch housing market, to analyze the relationship between market thinness, price setting behavior and time to sell. Our findings confirm the typical result that overpricing increases the time on market. In addition, we find evidence of quicker list price reductions suggesting that overpricing is part of a strategy to search for the opportunity of high revenues and to learn about the market. Moreover, we are able to confirm the theory put forward by Lazear (1986) on the relation between atypical goods and the speed of price adjustments. Sellers of atypical houses are more uncertain about the price buyers want to pay and take time to learn about the market, thereby increasing the expected time on market and the time to price revisions. Market liquidity has a positive, i.e. shortening, effect on the time to sale and leads to quicker price revisions due to the increased opportunities for learning.

Keywords: market liquidity; pricing strategies; marketing time; overpricing; housing (search for similar items in EconPapers)
JEL-codes: R31 D83 D12 C41 E30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mkt and nep-ure
Date: 2008-05
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Persistent link: http://EconPapers.repec.org/RePEc:dnb:dnbwpp:176

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