Although bargaining is common in markets for heterogeneous goods, it has largely been ignored in the hedonic literature. In a break from that tradition, we establish sufficient conditions that permit one to identify the effect of buyer and seller bargaining on hedonic models. Our model is estimated using a previously overlooked feature of the American Housing Survey that permits us to observe characteristics of both buyers and sellers. Results suggest that household wealth, gender, and other demographic traits influence bargaining power. In addition, variation in bargaining power arising from the presence of school-age children accounts for anomalous seasonal patterns reported in various widely cited indices of quality-adjusted house prices.

Abstract This study investigates whether investors see through materially misstated earnings, and whether they anticipate earnings restatements. For firms that restate at least one annual report, we find that investors are misled by mistakes in reported earnings at the time of initial earnings announcements. Investors react positively to the component of the favorable earnings surprise that will subsequently be restated, and they attach the same valuation to it as to the true earnings surprise. We also find that investors anticipate the subsequent downward restatements and start marking stock prices down several months before a restatement announcement, so that the full impact of a restatement is about three times as large as the restatement announcement effect. Indeed, we show that investors punish restating firms because the stock price gains that shareholders enjoy when firms initially announce overstated earnings are more than reversed by the time of the restatement announcement.