Spatial Competition and Shopping Externalities: Evidence from the Housing Market

Spatial Competition and Shopping Externalities: Evidence from the Housing Market In search markets, greater spatial concentration of sellers increases price competition. At the same time, though, a greater concentration of sellers can create a shopping externality by attracting more buyers to the site. Using housing sales data, we test for spatial competition and shopping externality effects on prices and marketing time. We find that they reflect both competitive and shopping externality effects from surrounding houses, although the relative strength varies with how fresh the house is in the market, the freshness of surrounding houses, and the phase of the market cycle. New listings have the strongest shopping externality effect on neighboring houses that have been on the market for some time. Vacant houses have their strongest competition effects in the declining market and externality effects in the rising market. Fresh houses on the market reap little benefit from shopping externalities in all phases of the market cycle. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Spatial Competition and Shopping Externalities: Evidence from the Housing Market

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-006-6959-4
Publisher site
See Article on Publisher Site

Abstract

In search markets, greater spatial concentration of sellers increases price competition. At the same time, though, a greater concentration of sellers can create a shopping externality by attracting more buyers to the site. Using housing sales data, we test for spatial competition and shopping externality effects on prices and marketing time. We find that they reflect both competitive and shopping externality effects from surrounding houses, although the relative strength varies with how fresh the house is in the market, the freshness of surrounding houses, and the phase of the market cycle. New listings have the strongest shopping externality effect on neighboring houses that have been on the market for some time. Vacant houses have their strongest competition effects in the declining market and externality effects in the rising market. Fresh houses on the market reap little benefit from shopping externalities in all phases of the market cycle.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Apr 4, 2006

References

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