Information and housing search: theory and evidence from China market

Abstract

ABSTRACTAsymmetric market information plays a role in households’ housing choice. To study this role, we theoretically and empirically examine the varied behaviours between better-informed and less-informed households in a housing market. The housing search model theoretically predicts that better-informed households are more likely to secure a better deal. With the data from Tianjin in China, hedonic models are calibrated to quantify the impacts of asymmetric information on housing search outcomes. The results show that the less-informed homebuyers need to pay around 1~2.3% more than those better-informed homebuyers after controlling the heterogeneity of housing units, which are consistent with the theoretical predictions. It suggests that policies and institutions to alleviate asymmetric information in housing market could improve the welfare of households.