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Professor George Fallis in his book "Housing Economics" writes:

(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.

My Question:

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!)

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    $\begingroup$ I have to admit I do not see the Professor's argument. The same could be said about any market. My selling price depends on what I believe about costumers' willingness to pay, and my bidding price would depend on my search costs and my beliefs on the price distribution. Assuming consistent beliefs it is also not clear to me why "The elegant separation of the demand side and the supply side is no longer possible." $\endgroup$
    – Giskard
    Feb 12, 2018 at 7:55
  • $\begingroup$ @denesp in his book he begins with describing the housing market from the view of principles/intermediate micro. When relaxing assumptions its noted that that the prices of the housing market (being that housing is a heterogeneous good) are based on imperfect information which is much more prevalent in the housing market than many other markets for goods and services. $\endgroup$
    – Bensstats
    Feb 13, 2018 at 20:22
  • $\begingroup$ A very standard game-theoretic reference are Shapley-Scarf housing markets. It is basically a model of any matching market with indivisible goods, an actual housing market may be quite far from this, of course. Shapley, L., & Scarf, H. (1974). On cores and indivisibility. Journal of mathematical economics, 1(1), 23-37. $\endgroup$
    – kitsune
    Mar 1 at 11:00

1 Answer 1

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-Game Theory and Real Options: Analysis of Land Value and Strategic Decisions in Real Estate Development- Chun Kit So ( Timothy So )

https://dspace.mit.edu/bitstream/handle/1721.1/84171/867636352-MIT.pdf?sequence=2

-Course blog for INFO 2040/CS 2850/Econ 2040/SOC 2090

Using Game Theory to Understand the Housing Crisis of 2008

https://blogs.cornell.edu/info2040/2017/09/11/using-game-theory-to-understand-the-housing-crisis-of-2008/

-Why housing price in Hong Kong is so high? An explanation in game theory Ho-Yin Yue1* • King-Tai Leung 2 • Lee-Kei Fung - Economics and Business Letters

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    $\begingroup$ (-1) The first link is to an 84 page long Master's Thesis, the second is to a blog post on the housing bubble, not the housing market in general. $\endgroup$
    – Giskard
    Feb 13, 2019 at 18:06

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