Estimation of a Hedonic House Price Model with Bargaining: Evidence from the Italian Housing Market

Lisi, Gaetano and Iacobini, Mauro (2012): Estimation of a Hedonic House Price Model with Bargaining: Evidence from the Italian Housing Market. Published in: XLI Incontro di Studio del Ce.S.E.T. No. Appraisals. Evolving proceedings in global change, Firenze University Press (2012): pp. 41-54.

Abstract

This empirical paper tests the role of bargaining in the formation process of housing prices in Italy. Housing markets are “thin”, local and decentralized, and thus buyers and sellers may have some market power. Hence, the selling price is influenced both by the characteristics of the product as well as by the bargaining power of the buyers and sellers. Furthermore, the bargaining power of the seller (buyer) can also be viewed as the cost of incomplete information imposed on the buyer (seller). The empirical results derived from multiple regression analysis support our theoretical assumptions. In fact, the variables created as proxies of bargaining power of the parties, and incorporated into the hedonic price function, are statistically significant and help to improve the performance of the hedonic model, thus reducing the differences between predicted and observed selling prices.

• Item Type: MPRA Paper
• Language: English
• Keywords: Hedonic price theory, bargaining power, asymmetric and incomplete information, multiple regression analysis
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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