Expectations heterogeneity and excessive price sensitivity in the land market

This paper analyses price behaviour in the land market in which the Walrasi an auctioneer is absent. Sellers are informed about the land value and post their asking prices; buyers are uninformed, have different opinions, and d ecide whether or not to accept the sellers' offers. In this market, sellers are "price-makers" with probabilisitic market power: they can influence th e sale probability through their asking price. Price may be excessively sen sitive to unexpected changes in market conditions. Moreover, buyer heteroge neity may accentuate the excessive price sensitivity. It has been shown tha t, the more heterogeneous their opinions, the more sensitive are prices. JE L Classification Numbers: D40, D43, D82, D84, E44, G12.