An optimal strategy for maximizing the expected real-estate selling price: accept or reject an offer?

Egozcue, Martin and Fuentes García, Luis and Zitikis, Ricardas (2012): An optimal strategy for maximizing the expected real-estate selling price: accept or reject an offer?

Abstract

Motivated by a real-life situation, we put forward a model and then derive an optimal strategy that maximizes the expected real-estate selling price when one of the only two remaining buyers has already made an offer but the other one is yet to make. Since the seller is not sure whether the other buyer would make a lower or higher offer, and given no recall, the seller needs a strategy to decide whether to accept or reject the first-come offer. The herein derived optimal seller's strategy, which maximizes the expected selling price, is illustrated under several scenarios, such as independent and dependent offers by the two buyers, and for several parametric price distributions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Real estate; Optimal strategy; Decision theory; Uncertainty; Two-envelope problem
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B21 - Microeconomics; L - Industrial Organization > L8 - Industry Studies: Services > L85 - Real Estate Services

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