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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 (CreaM) Economic Research Centre 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 paper shows that the zero-profit condition can be easily reformulated to take the distinctive features of the housing market into account. Indeed, it helps to provide a theoretical explanation for well-known empirical regularities in the housing markets.

Suggested Citation

  • Gaetano Lisi, 2013. "Matching models and housing markets: the role of the zero-profit condition," Working Papers 1301, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1301
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    References listed on IDEAS

    as
    1. Robert Novy-Marx, 2009. "Hot and Cold Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 1-22.
    2. Charles Leung & Youngman Leong & Siu Wong, 2006. "Housing Price Dispersion: An Empirical Investigation," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 357-385, May.
    3. Charles Ka Yui Leung & Jun Zhang, 2011. "¡§Fire Sales¡¨ in Housing Market: Is the House- Search Process Similar to a Theme Park Visit?," International Real Estate Review, Asian Real Estate Society, vol. 14(3), pages 311-329.
    4. Gaetano Lisi, 2013. "On the Functional Form of the Hedonic Price Function: A Matching-theoretic Model and Empirical Evidence," International Real Estate Review, Asian Real Estate Society, vol. 16(2), pages 189-207.
    5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
    6. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    7. Gaetano Lisi, 2011. "The Hedonic Price Function in a Matching Model of Housing Market," Economics Bulletin, AccessEcon, vol. 31(3), pages 2347-2355.
    8. Brian Petereson, 2009. "Fooled by Search: Housing Prices, Turnover and Bubbles," Caepr Working Papers 2009-004, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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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