IDEAS home Printed from https://ideas.repec.org/p/sce/scecf2/133.html
   My bibliography  Save this paper

Diversity of Neighborhood Transition

Author

Listed:
  • Sharon O'Donnell

Abstract

Long-term observers of urban communities know that the housing quality distributions of communities and the changes of these distributions over time encompass not one but a variety of patterns. The equilibrium outcome derived from the housing market literature explains one pattern of change. Using Rust's stochastic equilibrium model of durable goods (Econometrica, 1985), we determine that the market can generate a set of patterns depending upon the degree of heterogeneity of homeowners, the underlying technology of the structures and the developer's demand for land. The paper presents a dynamic model of homeowner choice, given a market with new and existing structures of varying quality and a renewal process that describes the deterioration and replacement rates of these structures. There is a continuum of homeowners that differ by taste. Given the developer's price for new construction, the scrap price for sub-quality structures, and equilibrium bids of homeowner types in the market, heterogeneous homeowners sort along a holding distribution of homes. This paper describes the conditions for the existence and stability of stochastic equilibrium outcome. We find that long-run demand/bid function is the upper envelope of the bid functions of the individual types of homeowners in the market. The heterogeneous population (or diversity of preferences) leads to variations in the range of quality demanded for residential services and variations in optimal holding times for homes. Diversity also lead to utility gains for all homeowners.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sharon O'Donnell, 2002. "Diversity of Neighborhood Transition," Computing in Economics and Finance 2002 133, Society for Computational Economics.
    • Handle: RePEc:sce:scecf2:133
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    More about this item

    Keywords

    stochastic dynamic optimization; dynamic programming; housing;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf2:133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/sceeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.