Estimating Bargaining Power in the Market for Existing Homes

John P. Harding · Stuart S. Rosenthal · Clemon F. Sirmans

268 citations0/0 files storedThe Review of Economics and Statistics

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Housing Market and Economics Consumer Market Behavior and Pricing Economic theories and models

Abstract

Although bargaining is common in markets for heterogeneous goods, it has largely been ignored in the hedonic literature. In a break from that tradition, we establish sufficient conditions that permit one to identify the effect of buyer and seller bargaining on hedonic models. Our model is estimated using a previously overlooked feature of the American Housing Survey that permits us to observe characteristics of both buyers and sellers. Results suggest that household wealth, gender, and other demographic traits influence bargaining power. In addition, variation in bargaining power arising from the presence of school-age children accounts for anomalous seasonal patterns reported in various widely cited indices of quality-adjusted house prices.

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References

1974Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition 1987Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products 1971Price Indexes and Quality Change 1995Race and Gender Discrimination in Bargaining for a New Car 1990Forecasting Prices and Excess Returns in the Housing Market 1988The Duration of Marketing Time of Residential Housing 1986Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry 1991Fair Driving: Gender and Race Discrimination in Retail Car Negotiations

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