Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
970828 | Journal of Urban Economics | 2013 | 14 Pages |
Abstract
We propose a theory of how repairs affect prices under imperfect information. Our model reveals that repairs may lower prices because, if repairs are not always successful, they may reveal negative information about product quality. We also show that the price effect of repairs is increasing in the share of defective products in the population. Under perfect information a repair cannot lower the price and the price effect does not depend on the defective unit share. Data on condominium transactions during Vancouver’s leaky condominium crisis provide support for the model predictions.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Sanghoon Lee, John Ries, C. Tsuriel Somerville,