The higher interest rates have cooled the residential real estate market a bit, which is nice because for a run of three years or so, every home that was in decent condition was selling in multiple offers. It was common for a buyer to bid on four, five, seven homes before they were the winners.
Recently at a sales meeting the manager pulled the topic out of his list of things to talk about at a meeting because some properties are still attracting several offers. The strategies the office came up with filled the large sheet of paper on the easel at the front of the room. There’s more than one way to write and present an offer to a seller.
This made me think of game theory as the purpose of the meeting conversation was to theorectically compare strategies amongst the active participants in the market. Like in game theory, agents develop a sense of their buyers valuation of the home. There are many angles to this, but given the process of considering other options, perhaps loosing out on other bidding situations, the agent shares the strategies discussed amongst the agents in the meeting, and advises the buyer accordingly.
While reading Isreal Kirzner work, I thought his concept of discovery best described the process buyers go through in the market to arrive at their home purchase. After repeated investigations into the various housing options, perhaps with breaks in between to go home and reassess the purpose of the move, buyers discover their best option and only then are motivated to pursue an offer to the seller.
I can see now that the game theory part is the setup for strategy, competition and cooperation with the seller once the property has been identified. The discovery part has to do solely with the buyers insights into which property has that added benefit that boosts the property ahead of others in accomodating their needs. It is more useful to them and their particular circumstances.
It’s funny beause often a buyer is attracted to a property for the some or all of the same reasons the seller has enjoyed it during their tenure. And that affinitiy for the same likes and dislikes encourages the parties toward cooperation.
Home Economics 