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Why housing price in Hong Kong? An explanation in game theory approach

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  • Ho-Yin Yue

Abstract

In most studies relate to housing price, the price is related to factors such as housing supply and demand, interest rate and money supply. A complete competition between suppliers and demanders in the housing market is assumed in most studies. However, when the land supplier is monopoly and the number of land demanders is very limited, the assumption may be invalid. Thus, a different theoretical approach is needed. In this paper, a game theory approach is used to explain the housing price in Hong Kong. Two main findings are found. Firstly, using public auction for land selling in an oligopolistic housing market would lead to a high housing price which government is hard to adjust. Secondly, enforcing windfall tax is an effective method to lower the housing price while maximizing government income at the same time.

Suggested Citation

  • Ho-Yin Yue, 2012. "Why housing price in Hong Kong? An explanation in game theory approach," Economics and Business Letters, Oviedo University Press, vol. 1(3), pages 8-15.
  • Handle: RePEc:ove:journl:aid:9371
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    File URL: http://www.unioviedo.es/reunido/index.php/EBL/article/view/9371
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    1. Lucy Chennells, 1997. "The windfall tax," Fiscal Studies, Institute for Fiscal Studies, vol. 18(3), pages 279-291, August.
    2. Geoffrey Keogh & Eamonn D'Arcy, 1999. "Property Market Efficiency: An Institutional Economics Perspective," Urban Studies, Urban Studies Journal Limited, vol. 36(13), pages 2401-2414, December.
    3. Erwin van der Krabben & Jan G. Lambooy, 1993. "A Theoretical Framework for the Functioning of the Dutch Property Market," Urban Studies, Urban Studies Journal Limited, vol. 30(8), pages 1381-1397, October.
    4. Lastrapes, William D., 2002. "The Real Price of Housing and Money Supply Shocks: Time Series Evidence and Theoretical Simulations," Journal of Housing Economics, Elsevier, vol. 11(1), pages 40-74, March.
    5. Herman G. Berkman, 1965. "The Game Theory of Land Use Determination," Land Economics, University of Wisconsin Press, vol. 41(1), pages 11-19.
    6. Yu-Hung Hong, 1998. "Transaction Costs of Allocating Increased Land Value Under Public Leasehold Systems: Hong Kong," Urban Studies, Urban Studies Journal Limited, vol. 35(9), pages 1577-1595, August.
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