Doctor of Philosophy, The Ohio State University, 2016, Agricultural, Environmental and Developmental Economics
What information is captured in home prices? Clearly prices should reflect characteristics such as square footage, build quality, and the number of bedrooms. Economists also believe that house prices reflect local characteristics, such as school and air quality, presence of open space, and crime rates. Traditionally, researchers employ hedonic models, where the marginal willingness to pay of these characteristics is obtained by running a linear regression of housing and neighborhood characteristics on the log of house price. These models have been used to study the value of a myriad of topics, from pollution and crime rates, to views of windmills and presence of nearby methamphetamine labs. As with many methods of analysis, hedonic models are subject to numerous assumptions and caveats, many of which are often ignored.This dissertation explores several complexities of and proposes new means of employing house prices in economic analysis. The first chapter asks a question that has received little study: why do buyers pay different prices for the same house? In most studies utilizing house transactions, the researcher does not know who the buyers and sellers are, and thus implicitly assumes that specific types of individuals have no effect on home prices. The chapter measures the effect of experience: the relative number of transactions the buyer and seller have taken part in over a given period of time. First, I develop a two-sided real estate search model that incorporates information costs, search costs, and Nash bargaining power. I test the implications of this model using repeat-sales housing data on 113,272 transactions from 1998-2006 in two large metropolitan regions of Ohio. The main results show that more experienced buyers purchase properties at a discount, experienced sellers sell at a premium, and that the magnitude of these differences varies depending on the relative and absolute levels of buyer and seller experience and geographic location. On average, (open full item for complete abstract)
Committee: Elena Irwin (Advisor); Mark Partridge (Committee Member); Allen Klaiber (Committee Member)
Subjects: Agricultural Economics; Economics; Environmental Economics