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Theory of the Diffusion of Price Inflation in an Imperfect Market Similar to Housing, Having Delayed Arbitrage

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  • H D Vinod

    (American Telephone and Telegraph Company, PO Box 2016, New Brunswick, New Jersey 08903, USA)

Abstract

A new mathematical theory of the diffusion of price inflation over time, in an imperfect market similar to the residential housing market, is developed. The underlying economic force is the imperfect arbitrage operating with time delays upon ‘close’ substitutes for related products arranged according to an idealized index of desirability (for example, distance from a city center). The analysis is based on a second-order partial differential equation with appropriate initial and boundary conditions. The model is illustrated with three-dimensional plots for the price of housing at the city center and at various distances from the city center at specified time lags.

Suggested Citation

  • H D Vinod, 1979. "Theory of the Diffusion of Price Inflation in an Imperfect Market Similar to Housing, Having Delayed Arbitrage," Environment and Planning A, , vol. 11(11), pages 1219-1229, November.
    • Handle: RePEc:sae:envira:v:11:y:1979:i:11:p:1219-1229
    DOI: 10.1068/a111219
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    References listed on IDEAS

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    1. G J Papageorgiou, 1971. "The Population Density and Rent Distribution Models within a Multicentre Framework," Environment and Planning A, , vol. 3(3), pages 267-281, September.
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