Estimating Supply Functions for Residential Real Estate Attributes

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Abstract
This article is the first to identify and estimate developers’ supply functions for real estate attributes. It introduces instruments that separate the demand side effects of real estate attributes and capture the nature of developers upon their initial business establishment into a two‐stage estimation model. We construct a unique data set by merging the data sets containing characteristics of projects and developers with the data set of new private nonlanded residential sales in Singapore. The study covers the period from January 1995 to March 2009. The supply functions for unit area and floor level are concave with developers’ building experience, and convex with developers’ business age. Developers enjoy marginal cost reductions on the two attributes after they have developed 1,000 or more units; and young developers have steeper “learning curve” than other developers. Old and experienced developers demonstrate less elasticity in their supply functions than young and inexperienced developers. This study provides new empirical evidence on corporate learning curve and knowledge diffusion processes with regard to the supply of real estate attributes.

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