Price competition and market concentration: Evidence from the land market in China.

While localized price competition in many markets has been extensively analyzed, little empirical work has been undertaken in the land market. It is the intent of this paper, therefore, to investigate the nature of spatial price competition among land sellers that compete in concentrated markets within a specific geographical area. Applying spatio-temporal autoregressive model to data from the residential land market in China from 2007 to 2015, we find that, (1) the land market for residential development is highly localized, where land sellers (local governments) respond more strongly to the price changes by "close-by" sellers; (2) larger market share is significantly associated with less spatial price response and higher land price. Placebo analysis using the sample of land supply for industrial development reinforces a causal interpretation of our main findings. Results from this paper permit the conclusion that the supply of land for residential development is not a perfect competitive but a localized competitive market where land sellers controlling a larger share of the market exercise market power to maximize land revenue. • The first study investigating the nature of spatial price competition in land market. • Price competition among land sellers is highly localized. • Market concentration significantly influences the pricing behaviors of land sellers. • Land sellers exercise market power to maximize land revenue. [ABSTRACT FROM AUTHOR]