This paper develops a matching model à la Pissarides (2000) in order to explain a basic fact of housing markets: price dispersion. The variance in house prices is basically due to both the ex-ante heterogeneity of the parties (i.e., bargaining power, tastes, asymmetric information) and the...

This paper examines whether the baseline Mortensen-Pissarides matching model can account for the housing market facts, namely, the existence of price dispersion, the positive correlation between housing price and trading volume, and between housing price and time-on-the-market. Our main finding...