Iwata, Shinichiro and Sumita, Kazuto and Fujisawa, Mieko (2012): Price competition in the spatial real estate market: Allies or rivals?
Download (440kB) | Preview
This paper examines real estate pricing featuring the price response curve, both theoretically and empirically. The Bertrand model with differentiated products suggests that the price response of real estate may differ when properties in the vicinity are priced by an affiliated firm or one's own firm. This is because the firm can maintain the collusive state if real estate prices in the neighborhood are priced by allies, whereas it loses it if prices are priced by rivals. To examine this prediction, a spatial autoregressive model with autoregressive and heteroskedastic disturbances, including a share of allies in the vicinity, is estimated using data on the residential condominium market in central Tokyo. Empirical results provide support for the model prediction.
|Item Type:||MPRA Paper|
|Original Title:||Price competition in the spatial real estate market: Allies or rivals?|
|Keywords:||Real estate prices; Strategic pricing; Spatial econometrics|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
L - Industrial Organization > L8 - Industry Studies: Services > L85 - Real Estate Services
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets
|Depositing User:||Shinichiro Iwata|
|Date Deposited:||19. Mar 2012 09:09|
|Last Modified:||08. Sep 2015 17:40|
Anselin, L. 1988. Spatial Econometrics: Methods and Models. Kluwer Academic Publishers, Boston.
Beck, J., Scott, F., and Yelowitz, A. 2012. Concentration and market structure in local real estate markets. Real Estate Economics: forthcoming.
Beron, K.J., Hanson, Y., Murdoch, J.C., and Thayer, M.A. 2004. Hedonic price functions and spatial dependence: Implications for the demand for urban air quality, in: Anselin, L., Florax, R.J.G.M., and Ray, S.J. (Eds.), Advances in Spatial Econometrics, Springer-Verlag, Berlin.
Bourassa, S.C., Cantoni, E., and Hoesli, M. 2007. Spatial dependence, housing submarkets, and house price prediction. Journal of Real Estate Finance and Economics, 35 (2): 143-160.
Bresnahan, T.F. 1987. Competition and collusion in the American automobile industry: The 1955 price war. Journal of Industrial Economics, 35 (4): 457-482.
Brueckner, J.K. 2001. Strategic interaction and spatial econometrics. Paper presented at Center for Spatially Integrated Social Sciences (CSISS) Specialist Meeting on Spatial Externalities, 2001, Santa Barbara, CA.
Brueckner, J.K., and Saavedra, L.A. 2001. Do local governments engage in strategic property-tax competition? National Tax Journal, 54 (2): 203-230.
Can, A. 1990. The measurement of neighborhood dynamics in urban house prices. Economic Geography, 66 (3): 254-272.
Can, A. 1992. Specification and estimation of hedonic housing price models. Regional Science and Urban Economics, 22 (3): 453-474.
Can, A., and Megbolugbe, I. 1997. Spatial dependence and house price index construction. Journal of Real Estate Finance and Economics, 14 (1/2): 203-222.
Chen, Y., Clapp, J.M., and Tirtiroglu, U. 2011. Hedonic estimation of housing demand elasticity with a markup over marginal costs. Journal of Housing Economics, 20 (4): 233-248.
Florax, R.J.G.M, Folmer, H., and Rey, S.J. 2003. Specification searches in spatial econometrics: The relevance of Hendry's methodology. Regional Science and Urban Economics 33 (5): 557-579.
Gérard, M., Jayet, H., and Paty, S. 2010. Tax interactions among Belgian municipalities: Do interregional differences matter? Regional Science and Urban Economics, 33 (4): 489-516.
Goodman, A.C., and Thibodeau, T.G. 1998. Housing market segmentation. Journal of Housing Economics, 7 (2): 121-143.
Im, K.S. 2000. Robustifying Glejser test of heteroskedasticity. Journal of Econometrics, 97 (1): 179--188.
Jarque, C.M., and Bera, A.K. 1987. A test for normality of observations and regression residuals. International Statistical Review, 55 (2): 163-172.
Kelejian, H.H., and Prucha, I.R. 1998. A generalized spatial two-stage least squares procedure for estimating a spatial autoregressive model with autoregressive disturbances. Journal of Real Estate Finance and Economics, 17 (1): 99-121.
Kelejian, H.H., and Prucha, I.R. 2010. Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances. Journal of Econometrics, 157 (1): 53-67.
Kim, C.W., Phipps, T.T, and Anselin, L. 2003. Measuring the benefits of air quality improvement: A spatial hedonic approach. Journal of Environmental Economics and Management, 45 (1): 24-39.
LeSage, J.P., and Pace, R.K. 2009. Introduction to Spatial Econometrics, CRC Press, Boca Raton, FL.
Machado, J.A.F., and Santos Silva, J.M.C. 2000. Glejser's test revisited. Journal of Econometrics, 97 (1): 189-202.
McMillen, D.P., Singell, L.D. Jr., and Wadell, G.R. 2007. Spatial competition and the price of college. Economic Inquiry, 45 (4): 817-833.
Mobley, L.R. 2003. Estimating hospital market pricing: An equilibrium approach using spatial econometrics. Regional Science and Urban Economics, 40 (5): 336-342.
Mobley, L.R., Frech, H.E., and Anselin, L. 2009. Spatial interaction, spatial multipliers and hospital competition. International Journal of the Economics and Business, 16 (1): 1-17.
Palm, R. 1978. Spatial segmentation of the urban housing market. Economic Geography, 54 (3): 210-221.
Pennerstorfer, D. 2009. Spatial price competition in retail gasoline markets: Evidence from Austria. Annals of Regional Science, 43 (1): 133-158.
Pinkse, J., Slade M.E., and Brett, C. 2002. Spatial price competition: A semiparametric approach, Econometrica, 70 (3): 1111-1153.
Pryce, G., and Evans, G. 2007. Identifying submarkets at the sub-regional level in England. Department of Communities and Local Government, London.
Small, K.A., and Steimetz, S. 2007. Spatial hedonics and the willingness to pay for residential amenities. Economics working paper no. 05-06-31, University of California, Irvine, CA.
Urzúa, C.M. 1996. On the correct use of omnibus test for normality. Economics Letters, 53 (3): 247-251.