List Price Information in the Negotiation of Commercial Real Estate Transactions: Is Silence Golden?

摘要

We examine the use (and non-use) of list price information in the process of marketing commercial real estate. While housing market research suggests that list prices can serve as a strong anchor and/or signal, list price information is included in less than one-third of the commercial property sales and is less likely to be included as part of the sellers’ offering information for larger and more complex properties. Given the potentially powerful effect of list prices (first offers) on outcomes, the non-use of list price information is a puzzle. We speculate that the limited use of list prices may be due to the sellers’ interests in both maintaining their informational advantage and not truncating higher than expected offers, especially during periods of economic growth or with more complex properties. Using a two-stage selection correction model, we find that office properties which provide list price information are, on average, associated with lower price outcomes (ceteris paribus) and that these outcomes vary by price cohort and economic condition. It is important to note, however, that while these findings identify a correlation, they do not necessarily imply causation. Our results support the notion that asymmetric information and information signaling play a dominant role in explaining the sellers’ strategic non-use of list price information in the commercial real estate market and that the signaling effect is more pronounced in higher priced properties and during periods of strong economic growth.