Publication: Endogenous price bubbles in a multi-agent system of the housing market
Issued Date
2015
Resource Type
Language
eng
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Mahidol University
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PLOS ONE
Bibliographic Citation
Plos One. Vol.10, No.6 (2015), e0129070
Suggested Citation
Kouwenberg, R, Zwinkels, R. C. Endogenous price bubbles in a multi-agent system of the housing market. Plos One. Vol.10, No.6 (2015), e0129070. doi:10.1371/journal.pone.0129070 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/3107
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Title
Endogenous price bubbles in a multi-agent system of the housing market
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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.