A DYNAMIC EQUILIBRIUM-MODEL OF HOUSING DEMAND AND MOBILITY WITH TRANSACTIONS COSTS

This study addresses intertemporal housing demand in the presence of transactions costs. The consumer solves a problem similar to a government's calculation of the socially optimal level of a public good. Instead of the government's optimizing across individuals, the consumer optimizes over time periods, subject to the constraint that housing consumption remains constant. The resulting immobility cost provides a latent variable that can be modeled and compared to moving costs in the move-stay decision. Housing demand, number of moves, and lengths of stay all emerge endogenously. Comparative statics results are derived, and simulation analysis shows the dynamic properties. (C) 1995 Academic Press, Inc.