title: Endogenous Price Bubbles in a Multi-Agent System of the Housing Market.
abstract: Economic history shows a large number of boom-bust cycles, with the U.S. real estate market as one of the latest examples. Classical economic models have not been able to provide a full explanation for this type of market dynamics. Therefore, we analyze home prices in the U.S. using an alternative approach, a multi-agent complex system. Instead of the classical assumptions of agent rationality and market efficiency, agents in the model are heterogeneous, adaptive, and boundedly rational. We estimate the multi-agent system with historical house prices for the U.S. market. The model fits the data well and a deterministic version of the model can endogenously produce boom-and-bust cycles on the basis of the estimated coefficients. This implies that trading between agents themselves can create major price swings in absence of fundamental news.
authors.affiliation: College of Management, Mahidol University, Bangkok, Thailand.
authors.forename: Roy
authors.initials: R
authors.lastname: Kouwenberg
authors.affiliation: Finance Department, VU University, Amsterdam, The Netherlands; Tinbergen Institute, Amsterdam, The Netherlands.
authors.forename: Remco C J
authors.initials: RC
authors.lastname: Zwinkels
mesh_terms: D003132:Commerce; D006798:Housing / Q000191:economics* / Q000706:statistics & numerical data; D006801:Humans; D018803:Models, Economic; D014481:United States