TY - JOUR
T1 - Optimal Real Estate Pricing and Offer Acceptance Strategy
AU - Khmelnitsky, Eugene
AU - Singer, Gonen
N1 - Publisher Copyright:
© 2013 IEEE.
PY - 2023
Y1 - 2023
N2 - We consider the problem of choosing the best of a set of sequential offers proposed by the market in a house-selling process. During each decision epoch, the seller sets a listing price, observes the offers and decides whether to accept the maximum one or to reject all of them. We model a fixed holding cost, which is the constant marketing cost of searching for buyers, and a variable cost that is proportional to the number of offers received during each epoch. The objective is to maximize the expected revenue. Most previous studies assume a stationary known distribution from which the buyers' offers are generated and which reflects the market valuation of the house. In contrast, we assume that the number of incoming offers, and the distribution from which each individual offer is generated, are affected by the seller's listing price (i.e., price-based demand response). Thus, we propose a new approach for the selling policy, which consists of the listing price and the offer acceptance threshold in each period. We derive the seller's optimal selling policy and apply it to a scenario involving the sale of individual residential properties in Ames (Iowa), which yields results consistent with empirical observations.
AB - We consider the problem of choosing the best of a set of sequential offers proposed by the market in a house-selling process. During each decision epoch, the seller sets a listing price, observes the offers and decides whether to accept the maximum one or to reject all of them. We model a fixed holding cost, which is the constant marketing cost of searching for buyers, and a variable cost that is proportional to the number of offers received during each epoch. The objective is to maximize the expected revenue. Most previous studies assume a stationary known distribution from which the buyers' offers are generated and which reflects the market valuation of the house. In contrast, we assume that the number of incoming offers, and the distribution from which each individual offer is generated, are affected by the seller's listing price (i.e., price-based demand response). Thus, we propose a new approach for the selling policy, which consists of the listing price and the offer acceptance threshold in each period. We derive the seller's optimal selling policy and apply it to a scenario involving the sale of individual residential properties in Ames (Iowa), which yields results consistent with empirical observations.
KW - Housing market policy
KW - dynamic pricing
KW - optimal stopping
KW - sequential decision making
UR - http://www.scopus.com/inward/record.url?scp=85162626239&partnerID=8YFLogxK
U2 - 10.1109/ACCESS.2023.3284549
DO - 10.1109/ACCESS.2023.3284549
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AN - SCOPUS:85162626239
SN - 2169-3536
VL - 11
SP - 58644
EP - 58653
JO - IEEE Access
JF - IEEE Access
ER -