Asymmetric information and list-price reductions in the housing market

• Unique and detailed administrative data containing daily information on house sales
• Theoretical discussion on role of list-prices in housing market without commitment
• Empirical analyses on effects of list-price reduction on house sales (time and price)
• Control for selective withdrawal from the market.

In housing markets with asymmetric information list prices may signal unobserved properties of the house or the seller. Asymmetric information is the starting point for many models for the housing market. In this paper, we estimate the causal effect of list-price reductions on the time houses remain for sale on the market to test for the presence of asymmetric information. We use very rich and extensive administrative data from the Netherlands. Our empirical results show that list-price reductions significantly increase the selling rate of a house, but also the rate of withdrawal from the market increases.