Abstract

Literature has established that a well-functioning housing and real estate market can promote development, poverty reduction, and improvements in quality of life, as a consequence of the strong relationship that exists between access to adequate housing, home ownership and a series of indirect welfare outcomes such as improved access to credit, increased productivity in family- owned businesses, improved labour market insertion, and increased household income. Hence, to have a clear idea of the housing markets a degree of competition is vital. The latter is the starting point for undertaking any policy tool which aims to improve these markets’ efficiency. This research aims to test the extent of competition in the Santiago of Chile housing market. In order to achieve this objective a two step methodology is proposed. In the first step, using a hedonic price model, a sub-market analysis is proposed to divide the Santiago housing market into different sub-markets to focus the competition analysis upon these sub-markets. The second step is the tacit collusion test itself which will be made comparing the industry mark-up against the business cycle in every sub-market, using panel data regression models.