1203.5298 (Rémi Lemoy et al.)

Rent distribution in a simple model of housing price formation    [PDF]

Rémi Lemoy, Eric Bertin

We consider a simple stochastic model of a urban housing market, in which the interaction of tenants and landlords induces rent (or price) fluctuations. We simulate the model numerically and measure the equilibrium price distribution, which is found to be well-described by a lognormal law. We also study the influence of the density of agents (or equivalently, the vacancy rate) on the price distribution. A simplified version of the model, amenable to analytical treatment, is proposed and allows us to recover a normal distribution for the logarithm of the price. The predicted equilibrium value agrees quantitatively with numerical simulations, while a qualitative agreement is obtained for the standard deviation.

View original: http://arxiv.org/abs/1203.5298