I'll buy that: The Schelling Model of Segregation in an Owner Occupied Housing Market

The Schelling Model of Spatial Segregation is a fundamental consumer choice model in the fields of computational and urban economics. In our paper, we unite the research from these two fields to examine if the housing preferences of a heterogeneous population of homeowners lead to Schelling's equilibrium outcomes. The original Schelling model was a market of renters with complete freedom to move to any vacant unit. The United States housing market is best characterized as an owner occupied market. The exchange in an owner occupied market is not complete unless the owner finds a buyer willing to pay the current owner's reservation price for the home and the owner successfully completes a transaction for another home. For a given home, it may take a number of periods for the sale transaction to occur and the neighborhood's racial characteristics may change. The paper applies Schelling's market assumptions to a mechanism that replicates an owner's market. Our primary research interest is to determine how this mechanism influences the equilibrium outcome. Our secondary research interests are to compare differences in the sale prices of homes, the number of completed and retracted transactions and the length of a home's "time on the market".