Levin, E.J. and Pryce, G. (2007) A Statistical Explanation for Extreme Bids in the House Market. Urban Studies, 44(12), pp. 2339-2355. (doi: 10.1080/00420980701540903)
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Abstract
This paper proposes a simple statistical explanation for the phenomenon of extreme bids. During a boom, the housing market regime switches from a single bidder to a multiple bidder environment. The sale price in a multiple bidder auction is the maximum bid and the distribution of maximum bids contains a much higher proportion of extreme bids compared with the distribution of single bidder valuations. While this theory does not preclude behavioural explanations of extreme bids, it does demonstrate that a world free from strategic and idiosyncratic behaviour would not be a world free from extreme bids during boom periods. Therefore, when gauging the impact of strategic or idiosyncratic behaviour (either hypothetically or empirically) one has to measure the effect against a baseline regime where extreme bids are inevitable, not against a world that is free from extreme bids.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Pryce, Professor Gwilym and Levin, Dr Eric |
| Authors: | Levin, E.J., and Pryce, G. |
| College/School: | College of Social Sciences > School of Social and Political Sciences > Urban Studies |
| Journal Name: | Urban Studies |
| ISSN: | 0042-0980 |
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