(Chapter 4 pg. 78)
The (home)owners will establish a pricing strategy depending on how they believe demanders are behaving; and the search strategy of demanders will depend upon the pricing behaviour of the (home)owners. The elegant separation of the demand side and the supply side is no longer possible. The modelling of such a market will be extremely complex, and the idea of equilibrium will have to be rethought.
This being said there is one thing that comes to mind when wanting to model house pricing based on this reality: Game Theory.
Is there any (famous or otherwise) papers which discuss the nature of Game Theory in the housing market?
(Papers with computer simulations of the housing market are additionally helpful!)