The Duration of Marketing Time of Residential Housing

The marketing of unique durable goods such as housing presents a good example for the application of search theory. An optimal stopping rule strategy is employed to model sellers' behavior. The primary hypothesis is that the greater the atypicality of a house, the greater the expected variance of offers. Because a maximizing seller will wish to entertain more offers the greater is the variance, the marketing time of atypical houses will be relatively longer than that of standard houses. Using a sample of resale houses, the empirical study uses a failure time model to confirm the hypothesis. Extensions are mentioned, including discussions of the role of the list price and the limitations of the standard hedonic regression approach when applied to housing.