An Optimal Strategy for Maximizing the Expected Real-Estate Selling Price: Accept or Reject an Offer?
17 Pages Posted: 15 Aug 2012
Date Written: August 15, 2012
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.
Keywords: Real estate, Optimal strategy, Decision theory, Uncertainty, Two-envelope problem
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Search and Matching in the Housing Market
By David Genesove and Lu Han
-
What Drives Returns to Euro Area Housing? Evidence from a Dynamic Dividend-Discount Model
By Paul Hiebert and Matthias Sydow
-
Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market
By Yongheng Deng, Stuart A. Gabriel, ...
-
Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market
By Yongheng Deng, Stuart A. Gabriel, ...
-
Distribution of Price and Quality under Information Asymmetry
By Richard D. Macminn and S. Hun Seog
-
Big House or Small House, Which One Should We Buy? Evidence from Hong Kong
By Chun Tsang, Gao Junjie, ...