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The Impact Of Rent Controls In Non-Walrasian Markets: An Agent-Based Modeling Approach

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  • Ralph Bradburd
  • Stephen Sheppard
  • Joseph Bergeron
  • Eric Engler

Abstract

We use agent-based models to consider rent ceilings in non-Walrasian housing markets, where bargaining between landlord and tenant leads to exchange at a range of prices. In the non-Walrasian setting agents who would be extramarginal in the Walrasian setting frequently are successful in renting, and actually account for a significant share of the units rented. This has several implications. First, rent ceilings above the Walrasian equilibrium price (WEP) can affect the market outcome. Second, rent ceilings that reduce the number of units rented do not necessarily reduce total market surplus. Finally, the distributional impact of rent controls differs from the Walrasian setting. Copyright Blackwell Publishing, Inc. 2006

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 46 (2006)
Issue (Month): 3 ()
Pages: 455-491

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Handle: RePEc:bla:jregsc:v:46:y:2006:i:3:p:455-491

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References

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  1. Jakob Roland Munch & Michael Svarer, . "Rent Control and Tenancy Duration," Economics Working Papers, School of Economics and Management, University of Aarhus 2001-7, School of Economics and Management, University of Aarhus.
  2. Dhananjay K. & Shyam Sunder, 2004. "Double Auction Dynamics: Structural Effects of Non-binding Price Controls," Yale School of Management Working Papers, Yale School of Management ysm141, Yale School of Management, revised 01 Apr 2008.
  3. Sah, Raaj Kumar, 1987. "Queues, Rations, and Market: Comparisons of Outcomes for the Poor and the Rich," American Economic Review, American Economic Association, vol. 77(1), pages 69-77, March.
  4. Edward L. Glaeser & Erzo F. P. Luttmer, 1997. "The Misallocation of Housing Under Rent Control," NBER Working Papers 6220, National Bureau of Economic Research, Inc.
  5. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisited," NBER Working Papers 5441, National Bureau of Economic Research, Inc.
  6. Rauh, Michael T., 2004. "Wage and price controls in the equilibrium sequential search model," European Economic Review, Elsevier, vol. 48(6), pages 1287-1300, December.
  7. Malpezzi, Stephen & Maclennan, Duncan, 2001. "The Long-Run Price Elasticity of Supply of New Residential Construction in the United States and the United Kingdom," Journal of Housing Economics, Elsevier, Elsevier, vol. 10(3), pages 278-306, September.
  8. Fershtman, C. & Fishman, A., 1991. "The "Perverse" Effects of Wage and Price Controls in Search Markets," Papers, Tel Aviv 11-91, Tel Aviv.
  9. Michael T. Rauh, 2001. "Heterogeneous beliefs, price dispersion, and welfare-improving price controls," Economic Theory, Springer, vol. 18(3), pages 577-603.
  10. Suen, Wing, 1989. "Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1384-94, December.
  11. Gode, Dhananjay K & Sunder, Shyam, 1997. "What Makes Markets Allocationally Efficient?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(2), pages 603-30, May.
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Cited by:
  1. Robert Axtell, 2007. "What economic agents do: How cognition and interaction lead to emergence and complexity," The Review of Austrian Economics, Springer, vol. 20(2), pages 105-122, September.
  2. John Mc Breen & Florence Goffette-Nagot & Pablo Jensen, 2011. "Information and Search on the Housing Market: An Agent-based Model," ERSA conference papers ersa11p1395, European Regional Science Association.

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