Analysis of Short-Term Equilibria in a Housing Market with Application to Development of Housing Policy
This paper concentrates on the theoretical analysis of local housing market behavior in a short-term period such that the set of market agents, the set of dwellings, and the agents' preferences are invariable within this period. The basic model presents the market as an economy of exchange with quasilinear utility functions of market agents. The model covers the sectors of dwellings for sale and for rent and takes into account the indivisibility of dwellings. Walrasian equilibria (their complete description, efficiency, and comparative statics) and equilibria with respect to rationing schemes (their existence, uniqueness, efficiency) are studied. A hypothetical market mechanism ensuring transition to an equilibrium from an arbitrary initial situation is formulated. Some basing on the obtained results approaches to regulation of housing markets are pointed out and the corresponding methods are described.
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