Information and Search on the Housing Market: An Agent-Based Model

John Mc Breen, Florence Goffette-Nagot () and Pablo Jensen ()
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John Mc Breen: Phys-ENS - Laboratoire de Physique de l'ENS Lyon - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - CNRS - Centre National de la Recherche Scientifique, LET - Laboratoire d'économie des transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique
Florence Goffette-Nagot: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique
Pablo Jensen: Phys-ENS - Laboratoire de Physique de l'ENS Lyon - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - CNRS - Centre National de la Recherche Scientifique

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Abstract: We simulate a closed rental housing market with search and matching frictions, in which both landlord and tenant agents are imperfectly informed of the characteristics of the market. Landlords decide what rent to post based on the expected effect of the rent on the time-on-the-market (TOM) required to find a tenant. Each tenant observes his idiosyncratic preference for a random offer and decides whether to accept the offer or continue searching, based on their imperfect knowledge on the distribution of offered rents. The steady state to which the simulation evolves shows price dispersion, nonzero search times and vacancies. We further assess the effects of altering the level of information for landlords. Landlords are better off when they have less information. In that case they underestimate the TOM and so the steady-state of the market moves to higher rents. However, when landlords with different levels of information are present on the market, the better informed are consistently better off. The model setup allows the analysis of market dynamics. It is observed that dynamic shocks to the discount rate can provoke overshoots in rent adjustments due in part to landlords use of outdated information in their rent posting decision.

Keywords: Real estate; rental market; search model; Agent-based model; simulation; Information; Time on the market (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

Published in Li Calzi M., Milone L., Pellizzari P. Progress in Artificial Economics, Computational and Agent-Based Models, Springer, pp. 153-164, 2010, Lecture Notes in Economics and Mathematical Systems

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00945969

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