The Evidence of Buyer Bargaining Power in The Stockholm Residential Real Estate Market

Abstract

The objective is to investigate whether uninformed buyers pay higher prices for single-family houses than do other buyers and test whether the bargaining power increases with information. We examine data on real estate prices and attributes, as well as household characteristics and buying process from Stockholm. Our results show that uninformed buyers seem to pay a higher price than informed buyers do. Bargaining power is not weaker for a first-time buyer but is weaker if the household has participated in several biddings and lost. Repeated bidding-and-losing households are more willing to increase their reservation price and pay a higher overall price compared to other households.