An Agent-Based Simulation of Rental Housing Markets

GATE Working Paper No. 09-08

35 Pages Posted: 17 May 2009 Last revised: 22 May 2015

See all articles by John Mc Breen

John Mc Breen

University of Lyon; Wageningen UR

Florence Goffette-Nagot

University of Lyon 2

Pablo Jensen

University of Lyon

Date Written: April 1, 2009

Abstract

We simulate a closed rental housing market with search and matching frictions, in which both landlord and tenant agents are imperfectly informed. Homogeneous landlords set rents to maximise revenue, using information on the market to estimate the relationship between posted rent and time-on-the-market (TOM). Tenants, heterogeneous in income, engage in undirected search accepting residences based on their idiosyncratic tastes for housing and a disagreement point derived from information on the distribution of offers. The steady state to which the simulation evolves shows price dispersion, nonzero search times and vacancies.

The main results concern the effects of increasing information on either side of the market. When tenants see a greater percentage of the distribution of offers, tenants learn to refuse high rents and so the population rises and tenants' utilities rise as does overall welfare. Conversely, when landlords have less information, their utility can rise as over estimations in best posting rent move the market to higher rents.

Keywords: Real estate, Rental markets, Search, Information, Simulation, Multi-agent systems

JEL Classification: R13, R20, R31, C63, J63

Suggested Citation

Mc Breen, John and Mc Breen, John and Goffette-Nagot, Florence and Jensen, Pablo, An Agent-Based Simulation of Rental Housing Markets (April 1, 2009). GATE Working Paper No. 09-08, Available at SSRN: https://ssrn.com/abstract=1405296 or http://dx.doi.org/10.2139/ssrn.1405296

John Mc Breen (Contact Author)

University of Lyon ( email )

93 Chemin des Mouilles
Ecully, 69009
France

Wageningen UR ( email )

Hollandseweg 1
Wageningen, 6706KN
Netherlands

Florence Goffette-Nagot

University of Lyon 2 ( email )

93, chemin des Mouilles
Ecully, 69130
France

Pablo Jensen

University of Lyon ( email )

93 Chemin des Mouilles
Ecully, 69009
France

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