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

Ho Yin Yue

Economics and Business Letters, 2012, vol. 1, issue 3, 8-15

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.

Date: 2012
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