Monopolistic competition, price discrimination as a development company behaviors in the housing primary market

Jacek Łaszek (), Krzysztof Olszewski () and Joanna Waszczuk

Chapter 9 in Papers presented during the Narodowy Bank Polski Workshop: Recent trends in the real estate market and its analysis - 2015 edition, 2016, pp v1, 185-202 from Narodowy Bank Polski

Abstract: Firms operating in the property sector use information asymmetry and the local monopoly to differentiate prices of housing units. Selling similar housing to purchasers at various prices allows them to maximize profits. The aim of this article is to analyze empirically the behavior of developers, that shape market situation. It is necessary to depart from the classical analysis of enterprises that operate in a free and competitive market and produce typical, homogeneous goods. We analyze firms that produce heterogeneous goods and make individual transactions with each client. We use the hedonic regression to compare the theoretical and empirical prices per sq. m. of dwelling in the primary market in Warsaw and find significant dispersions. The price discrimination strategy, caused mainly by changes in demand could be one of the explanations of the observed high, upward elasticity of prices.

Keywords: Monopolistic competition; price differentiation; housing market; information asymmetry (search for similar items in EconPapers)
JEL-codes: M2 O18 R31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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