Residential income segregation: A behavioral model of the housing market

We represent the functioning of the housing market and study the relation between income segregation, income inequality and house prices by introducing a spatial Agent-Based Model (ABM). Differently from traditional models in urban economics, we explicitly specify the behavior of buyers and sellers and the price formation mechanism. Buyers who differ by income select among heterogeneous neighborhoods using a probabilistic model of residential choice; sellers employ an aspiration level heuristic to set their reservation offer price; prices are determined through a continuous double auction. We first provide an approximate analytical solution of the ABM, shedding light on the structure of the model and on the effect of the parameters. We then simulate the ABM and find that: (i) a more unequal income distribution lowers the prices globally, but implies stronger segregation; (ii) a spike of the demand in one part of the city increases the prices all over the city; (iii) subsidies are more efficient than taxes in fostering social mixing.

• Publication year

  2016

• Venue

  Journal of Economic Behavior and Organization

• Publication date

  2016-06-01

• Fields of study

  Sociology, Physics, Economics

• Identifiers
  DOI 10.2139/SSRN.3084090arXiv 1606.00424
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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