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Matching Models and Housing Markets: the Role of the Zero-Profit Condition

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  • Gaetano Lisi

    (Creativity and Motivations Economic Research Centre (CreaM) - Department of Economics and Law, University of Cassino and Southern Lazio, Italy)

Abstract

The recent and growing literature which has extended the use of search and matching models even to the housing market does not use the free entry or zero-profit assumption as a key condition for solving the equilibrium of the model. This is because a straightforward adaptation of the basic matching model to the housing market seems impossible. However, this short paper shows that the zero-profit condition can be easily reformulated to take the distinctive features of the housing market into account. Indeed, the zero-profit condition considers the possibility that a buyer can become a seller and vice versa, since it is used to find the equilibrium of the model where the transition process from seller (buyer) to buyer (seller) comes to an end.

Suggested Citation

  • Gaetano Lisi, 2013. "Matching Models and Housing Markets: the Role of the Zero-Profit Condition," Economic Research Guardian, Mutascu Publishing, vol. 3(1), pages 54-60, June.
    • Handle: RePEc:wei:journl:v:3:y:2013:i:1:p:54-60
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    Keywords

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    JEL classification:

    • 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
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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