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Modeling and Computing Transactions Costs for Purchasers of Housing Services
Author(s) -
Goodman Allen C.
Publication year - 1990
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00506
Subject(s) - economics , consumption (sociology) , margin (machine learning) , microeconomics , work (physics) , residence , permanent income hypothesis , transaction cost , econometrics , macroeconomics , computer science , demographic economics , mechanical engineering , social science , machine learning , sociology , market liquidity , engineering
This paper models, as equilibrium behavior, buyers' behaviors under transactions costs and market failure constraints. It derives equilibrium conditions and it shows how they differ from unconstrained models. Standard utility and cost parameters are then used to estimate the economic costs of the constraints, which may be interpreted, at the margin, as the transactions costs of moving. If transactions costs are greater than the economic costs of the constraints, the household remains in a residence, even in response to changed price and income expectations. Changes in expected prices and incomes lead to changed housing demand even when the household cannot adjust housing consumption between periods. These findings have implications for empirical work with both cross‐section and panel data sets.