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A simple model of a speculative housing market

  • Roberto Dieci

    ()

  • Frank Westerhoff

We develop a simple model of a speculative housing market in which the demand for houses is influenced by expectations about future housing prices. Guided by empirical evidence, agents rely on extrapolative and regressive forecasting rules to form their expectations. The relative importance of these competing views evolves over time, subject to market circumstances. As it turns out, the dynamics of our model is driven by a two-dimensional nonlinear map which may display irregular boom and bust housing price cycles, as repeatedly observed in many actual markets. However, we also find that speculation may be a source of both stability and instability.

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File URL: http://hdl.handle.net/10.1007/s00191-011-0259-8
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 22 (2012)
Issue (Month): 2 (April)
Pages: 303-329

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Handle: RePEc:spr:joevec:v:22:y:2012:i:2:p:303-329
DOI: 10.1007/s00191-011-0259-8
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/journal/191/PS2

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  5. Lux, Thomas, 1997. "Time variation of second moments from a noise trader/infection model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(1), pages 1-38, November.
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  30. repec:arz:wpaper:eres2009-155 is not listed on IDEAS
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