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An Agent-Based Simulation of Rental Housing Markets

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  • John Mc Breen

    (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École normale supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD, Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - École normale supérieure de Lyon - ENS Lyon)

  • Florence Goffette-Nagot

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Pablo Jensen

    (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École normale supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD, Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - École normale supérieure de Lyon - ENS Lyon)

Abstract

We simulate a closed rental housing market with search and matching frictions, in which both landlord and tenant agents are imperfectly informed. Homogeneous landlords set rents to maximise revenue, using information on the market to estimate the relationship between posted rent and time-on-the-market (TOM). Tenants, heterogeneous in income, engage in undirected search accepting residences based on their idiosyncratic tastes for housing and a disagreement point derived from information on the distribution of offers. The steady state to which the simulation evolves shows price dispersion, nonzero search times and vacancies.The main results concern the effects of increasing information on either side of the market. When tenants see a greater percentage of the distribution of offers, tenants learn to refuse high rents and so the population rises and tenants' utilities rise as does overall welfare. Conversely, when landlords have less information, their utility can rise as over estimations in best posting rent move the market to higher rents.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00374157.

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Date of creation: 2009
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Handle: RePEc:hal:journl:halshs-00374157

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Related research

Keywords: Real estate; Rental markets; Search; Information; Simulation; Multi-agent systems;

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  1. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(2), pages 156-168, June.
  2. Marcus Allen & Ronald Rutherford & Thomas Thomson, 2009. "Residential Asking Rents and Time on the Market," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 38(4), pages 351-365, May.
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Cited by:
  1. 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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