Value is subjective. One person might want a certain house so much that he will pay for it $2 million, while another person won't give even $0.5 million to the same house. The market price of the house is, informally, an "average" between the different subjective values.

There are many databases for house prices in different locations, but I am interested in estimating the subjective values of the houses. Of course it is not practical to know the subjective value of each person for every house; I am interested in more general statistics, such as: the average subjective value, the median, the variance, the quartiles, etc.

Do you have any idea, what data can I use to get these estimates?

1 Answer 1


This data-request is very interesting but not trivial at all. (Hence, the somewhat late answer.)

What you refer to as subjective price, economists would often call reservation price. The reservation price is the maximal price a person would pay for a good, or put differently, her valuation for that good. As you rightly observed when you called it the subjective price, the reservation price differs from person to person.

This is where the difficulty starts. If a house is sold at 100,000$, for example, we do not know any person's reservation price. The person who bought the house might well have paid more if needed. Conversely, for the people who did not buy the house it is likely that their reservation price was below 100,000$ (as the seller would have accepted this price) but we cannot say what their exact reservation price is.

This being said, in the market for houses there are some tricks, you can use to get more information about people's reservation prices. Ideally, you could look at auction data. Auctions have the advantage that a lot of people make bids and thus, there will be more than one person that will at some point give away information about her reservation price. If person A buys the house for 100,000$ but before B has made a bid of 95,000$, you know that B's reservation price must lie somewhere between both numbers.

But it gets even better: for you data request it will be ideal to look at Vickrey Auctions (also called second-price sealed bid auctions). These are auctions where everyone gives a sealed bid, the highest bidder wins but only pays the second highest price. This is similar to an auction of ebay where the winner also pays only the second highest bid (and not her own) and where bids are essentially sealed if everyone votes in the last second. Standard economic auction theory shows that every person should truthfully report her reservation price in a Vickrey Auction. Thus, if you simply look at the bids people made in such an auction you will get a very good picture of people's subjective value.

So for your data request, my suggestion is that you look at the bids given in Vickrey Auctions in the housing market. I am not too familiar with the housing market per se, but I assume that especially for very expensive houses, auctioning them off would be one way how they are usually sold. Otherwise, if you are not interested in subjective value for houses but in general, arts auctions might be a good point to start. Of course, such data is not publicly available (without asking) and I cannot provide you with any link but if you (or anyone else, since this is quite old) is really interested in the matter for research, writing to auction houses would be a good starting point.

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