||CONSUMPTION OF REAL ASSETS AND THE CLIENTELE EFFECT
||Chernobai, Ekaterina; Chernobai, Anna
||This paper develops a theoretical model that explains how long-term consumption goals influence households' choice of real assets in situations when these assets have no investment value. Using a suburban residential housing market that exemplifies such a market, we develop a general equilibrium model for the valuation of illiquid assets. We show that, in equilibrium, clientele effect persists, with long-tenure agents overwhelmingly choosing higher quality properties and short-tenure agents settling for lower quality properties. Equilibrium values of our model variables related to buyers and sellers are simultaneously determined in a competitive Nash equilibrium. We also show that price-based liquidity and time-based liquidity measures may behave in a conflicting manner in equilibrium, which is a novel result in itself. This paper contributes to the understanding of a consumption-based clientele effect as well as different measures of liquidity.
|Year of publication:
||Asset pricing, clientele effect, illiquidity, search, housing, asymmetric information, buyer heterogeneity, time on the market, quality signalling
Chernobai, Ekaterina; Chernobai, Anna (2010).
CONSUMPTION OF REAL ASSETS AND THE CLIENTELE EFFECT. 17th Annual European Real Estate Society Conference in Milan, Italy,