IDEAS home Printed from https://ideas.repec.org/a/eee/transb/v41y2007i6p632-651.html
   My bibliography  Save this article

A random bidding and supply land use equilibrium model

Author

Listed:
  • Martínez, Francisco J.
  • Henríquez, Rodrigo

Abstract

A model of the static equilibrium in the real estate market is studied in this paper and a solution algorithm is proposed. Consumers and real estate suppliers are assumed to have idiosyncratic differences, which are described by the discrete choice theory with random-utility and profit-behavior. Consumers are differentiated into clusters by socioeconomic characteristics while suppliers are differentiated by production technology. Consumer behavior is subject to budget constraints (with fixed income), a quasi-linear utility function, and is affected by neighborhood externalities (households) and agglomeration economies (firms). The suppliers' behavior is restrained by zone regulations and affected by scale and scope economies. Total households by cluster are exogenous and total supply fits total demand. Real estate combined with location options is assumed to be discrete and differentiated, then transactions are modeled as auctions. Equilibrium prices are the result of auctions and the market clearing condition. These conditions generate a discontinuous non-linear location equilibrium problem where convexity is obtained by applying the MNL logit in all decisions. The equilibrium is described by a fixed-point equation system that, under some specified conditions, has a unique and stable solution; such conditions are analytically defined and represent a minimum degree of choice dispersion in the model. A fixed-point algorithm is proposed to solve the equilibrium, along with the conditions that assure convergence. This real estate equilibrium model can be applied to the highly complex reality of urban environments at a relatively low computational cost.

Suggested Citation

  • Martínez, Francisco J. & Henríquez, Rodrigo, 2007. "A random bidding and supply land use equilibrium model," Transportation Research Part B: Methodological, Elsevier, vol. 41(6), pages 632-651, July.
    • Handle: RePEc:eee:transb:v:41:y:2007:i:6:p:632-651
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0191-2615(06)00142-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ellickson, Bryan, 1981. "An alternative test of the hedonic theory of housing markets," Journal of Urban Economics, Elsevier, vol. 9(1), pages 56-79, January.
    2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    3. Francisco Martínez & Ricardo Hurtubia, 2006. "Dynamic Model for the Simulation of Equilibrium Status in the Land Use Market," Networks and Spatial Economics, Springer, vol. 6(1), pages 55-73, March.
    4. Francisco Martínez & John Roy, 2004. "A model for residential supply," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(3), pages 531-550, September.
    5. Anas, Alex, 1983. "Discrete choice theory, information theory and the multinomial logit and gravity models," Transportation Research Part B: Methodological, Elsevier, vol. 17(1), pages 13-23, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Justin Sueun & Mackett, Roger Laurence, 2006. "A bi-level model of the relationship between transport and residential location," Transportation Research Part B: Methodological, Elsevier, vol. 40(2), pages 123-146, February.
    2. Yannis M. Ioannides, 2010. "Neighborhood Effects and Housing," Discussion Papers Series, Department of Economics, Tufts University 0747, Department of Economics, Tufts University.
    3. Votsis, Athanasios, 2014. "Ecosystems and the spatial morphology of urban residential property value: a multi-scale examination in Finland," MPRA Paper 53742, University Library of Munich, Germany.
    4. Earnhart, Dietrich, 2002. "Combining Revealed and Stated Data to Examine Housing Decisions Using Discrete Choice Analysis," Journal of Urban Economics, Elsevier, vol. 51(1), pages 143-169, January.
    5. Zahra Saderion & Barton Smith & Charles A. Smith, 1994. "An Integrated Approach to the Evaluation of Commercial Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 9(2), pages 151-168.
    6. Ricardo Hurtubia & Michel Bierlaire, 2014. "Estimation of Bid Functions for Location Choice and Price Modeling with a Latent Variable Approach," Networks and Spatial Economics, Springer, vol. 14(1), pages 47-65, March.
    7. David Simmonds & Paul Waddell & Michael Wegener, 2013. "Equilibrium versus Dynamics in Urban Modelling," Environment and Planning B, , vol. 40(6), pages 1051-1070, December.
    8. Zhi Dong & Tien Sing, 2014. "Developer Heterogeneity and Competitive Land Bidding," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 441-466, April.
    9. Teulings, Coen & Ossokina, Ioulia V. & de Groot, Henri L.F., 2014. "Welfare Benefits of Agglomeration and Worker Heterogeneity," IZA Discussion Papers 8382, Institute of Labor Economics (IZA).
    10. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819, Elsevier.
    11. Brian A. Cromwell, 1990. "Prointegrative subsidies and their effect on housing markets: do race- based loans work?," Working Papers (Old Series) 9018, Federal Reserve Bank of Cleveland.
    12. De Groot, Henri L.F. & Ossokina, Ioulia V. & Teulings, Coen N, 2014. "Welfare Benefits of Agglomeration and Worker Heterogeneity," CEPR Discussion Papers 10216, C.E.P.R. Discussion Papers.
    13. Tomás Cox & Ricardo Hurtubia, 2021. "Latent Segmentation of Urban Space through Residential Location Choice," Networks and Spatial Economics, Springer, vol. 21(1), pages 199-228, March.
    14. Vincent Viguié, 2015. "Cross-commuting and housing prices in a polycentric modeling of cities," Policy Papers 2015.03, FAERE - French Association of Environmental and Resource Economists.
    15. Sudip Chattopadhyay, 2002. "Divergence in alternative Hicksian welfare measures: the case of revealed preference for public amenities," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(6), pages 641-666.
    16. F J Martínez, 1992. "The Bid—Choice Land-Use Model: An Integrated Economic Framework," Environment and Planning A, , vol. 24(6), pages 871-885, June.
    17. Huai, Yue & Lo, Hong K. & Ng, Ka Fai, 2021. "Monocentric versus polycentric urban structure: Case study in Hong Kong," Transportation Research Part A: Policy and Practice, Elsevier, vol. 151(C), pages 99-118.
    18. Sudip Chattopadhyay, 2003. "A Repeated Sampling Technique in Assessing the Validity of Benefit Transfer in Valuing Non-Market Goods," Land Economics, University of Wisconsin Press, vol. 79(4), pages 576-596.
    19. Gjestland, Arnstein & McArthur, David Philip & Osland, Liv & Thorsen, Inge, 2014. "The suitability of hedonic models for cost-benefit analysis: Evidence from commuting flows," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 136-151.
    20. Teulings, Coen N. & Ossokina, Ioulia V. & de Groot, Henri L.F., 2018. "Land use, worker heterogeneity and welfare benefits of public goods," Journal of Urban Economics, Elsevier, vol. 103(C), pages 67-82.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transb:v:41:y:2007:i:6:p:632-651. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.