Asymmetric buyer information influence on price in a homogeneous housing market

Abstract

Buyers often pay different prices for almost identical houses. One possible explanation is that there are information asymmetries in housing markets. Perhaps, buyers from outside the area have higher search costs and know less about the local market relative to that of current residents. In addition, an out-of-town buyer’s price expectations could be anchored to market prices in their town of origin. This study examines the effect of buyer heterogeneity in the form of geographic location on house prices. We use a new data set to examine the non-local buyer information asymmetry and anchoring hypothesis. Using transaction data from a large development in Chengdu, China, our empirical models are estimated with relatively homogeneous units sold over a short period of time by one seller to minimise possible bias resulting from omitted variables. Our results support the hypotheses that non-local buyers pay higher prices and that high price anchoring occurs.