House price dynamics and traffic mode choice [Elektronische Ressource] : three essays in real estate and urban economics / vorgelegt von Thomas Maier

Thomas Maier

Informations

• Publié par: ludwig-maximilians-universitat_munchen
• Publié le: 01 janvier 2007
• Nombre de lectures: 34
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

House Price Dynamics and Traffic
Mode Choice: Three Essays in Real
Estate and Urban Economics
Inaugural-Dissertation
zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.)
an der Ludwig-Maximilians-Universit¨at Munc¨ hen
2006
vorgelegt von
Thomas Maier
Referent: Prof. Sven Rady, Ph.D.
Korreferent: Prof. Ray Rees
Promotionsabschlussberatung: 07. Februar 2007To TessaAcknowledgements
First and foremost I would like to thank my supervisor Prof. Sven Rady. He steadily
encouraged me during the development of this thesis, gave very valuable comments on
all parts of this thesis and showed patience with me and my work in all stages of this
dissertation. Thanks to his helpful guidance, the process of turning a mathematician
to an economist was successfully completed. I am grateful to Prof. Ray Rees and
Prof. Peter Egger who agreed to serve as members in my thesis committee.
I am also indebted to my colleagues from the Munich Graduate School of Eco-
nomics, the Faculty of Economics and the Seminar of Dynamic Modelling. Especially,
I thank Christoph Hofmann, Oliver Nikutowski, Tu-Lam Pham, Markus Reisinger,
Ludwig Reßner and Ferdinand von Siemens for their helpful comments, suggestions
and corrections on different parts of this work. Furthermore, I thank Gaurav Anand,
ElmarBecker,SimonGamperl,FlorianNeubert,ThomasNitschkeandGeorgSteinlein
for proof-reading parts of this document.
Andreas Ertl and Konstantin Scholl shall be mentioned for improving some graphic
elements of this thesis.
I would like to thank Ingeborg Buchmayr and Manuela Beckstein for providing an
excellent working environment at the MGSE and at the Chair of Prof. Rady. The
professional hard- and software service of our computer expert Dirk R¨osing deserves
to be positively alluded to here as well.
I would like to mention here as well the great hospitality of the University of Cam-
bridge, Faculty of Economics, and Darwin College during my stay there in the year
2004.
Financial support from the DFG, the GRK 801 and SFB Transregio 15 is gratefully1
acknowledged. Finally,Ithankmyparentsfortheirsteadysupportinallmattersoflife.
This doctoral dissertation is dedicated to Tessa, for keeping me smiling throughout.Contents
1 Preface 7
2 Traffic Mode Choice and Optimal Congestion Regulation 16
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Related Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.3 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.4.1 Numerical Simulation of the Equilibrium . . . . . . . . . . . . . 33
2.5 Bottlenecks and Tolls . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.5.1 Welfare of the System . . . . . . . . . . . . . . . . . . . . . . . 35
2.5.2 Bottlenecks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.5.3 Tolls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.6 Conclusion and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.7 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3 Dynamics in the Rental Real Estate Market 64
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.2 Related Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.3 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
3.3.1 Supply Side of the Market . . . . . . . . . . . . . . . . . . . . . 70
3.3.2 Demand Side of the Market . . . . . . . . . . . . . . . . . . . . 71
3.3.3 Vacancy Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
3.3.4 Problem of the Landlord . . . . . . . . . . . . . . . . . . . . . . 733
3.4 Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3.4.1 Equilibrium Definition . . . . . . . . . . . . . . . . . . . . . . . 74
3.4.2 Eq Properties . . . . . . . . . . . . . . . . . . . . . . . 75
3.4.3 Steady State Equilibrium. . . . . . . . . . . . . . . . . . . . . . 77
3.4.4 Dynamics of Exogenous Shocks . . . . . . . . . . . . . . . . . . 78
3.5 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 80
3.6 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
4 A Generalization of the Ortalo-Magn´e-Rady Model on Credit Con-
straints and House Price Dynamics 85
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4.2 Related Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
4.2.1 High Volatility and Sensitivity to Income of the Young . . . . . 89
4.2.2 Correlation between Prices and Transaction Volume . . . . . . . 90
4.2.3 Overshooting of Prices after Exogenous Shocks. . . . . . . . . . 90
4.3 The Generalized Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4.3.1 Economic Setup . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4.3.2 Parameter Assumptions . . . . . . . . . . . . . . . . . . . . . . 94
4.3.3 Equilibrium Definition . . . . . . . . . . . . . . . . . . . . . . . 97
4.4 The Benchmark Case: Linear c-Utility and No Transaction Costs . . . 99
4.4.1 Steady State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.4.2 Exogenous Income Shocks . . . . . . . . . . . . . . . . . . . . . 102
4.5 Steady State in the Generalized Model . . . . . . . . . . . . . . . . . . 105
4.5.1 Steady State Equilibrium. . . . . . . . . . . . . . . . . . . . . . 105
4.5.2 Equilibrium Prices . . . . . . . . . . . . . . . . . . . . . . . . . 108
4.5.3 Determinants of Agents’ Decisions . . . . . . . . . . . . . . . . . 108
4.5.4 Extreme Cases of Consumption Patterns . . . . . . . . . . . . . 109
4.6 Exogenous Income Shocks in the Generalized Model . . . . . . . . . . . 111
4.6.1 Functional Specifications and Parameter Assumptions . . . . . . 111
4.6.2 Numerical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 1134
4.6.3 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 122
4.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
4.8 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
4.8.1 Proofs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
4.8.2 Further Conditions Fulfilled by Specification . . . . . . . . . . . 129
4.8.3 Transition after the Shock . . . . . . . . . . . . . . . . . . . . . 131
4.8.4 Numerical Approach . . . . . . . . . . . . . . . . . . . . . . . . 132
5 Concluding Remarks 134
Bibliography 137List of Figures
2.1 Depiction of the Urban Area with q=8 Uncongested Links . . . . . . . 25
2.2 The Reaching Distance . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.3 Depiction of the Equilibrium Distribution of Traffic . . . . . . . . . . . 31
2.4 A Qualitative Depiction of the Function N(r) . . . . . . . . . . . . . . 32
2.5 N(r) and y(r) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.6 Welfare of Whole Urban Area Dependent on m and q . . . . . . . . . . 35
2.7 Equilibrium with a Bottleneck at d = 50 . . . . . . . . . . . . . . . . . 38
2.8 Welfare with a Very Severe Bottleneck . . . . . . . . . . . . . . . . . . 39
2.9 Optimal Bottleneck Severeness . . . . . . . . . . . . . . . . . . . . . . . 40
2.10 Optimal Distance of the Bottleneck Dependent on Bottleneck Severeness 42
2.11 Optimal Toll Fee Dependent on the Position of the Tollgate . . . . . . 45
2.12 Equilibrium Distribution for Two Possible Tollgates . . . . . . . . . . . 47
3.1 Recursive Income Structure for a Landlord . . . . . . . . . . . . . . . . 73
3.2 Overshooting of Rental Prices . . . . . . . . . . . . . . . . . . . . . . . 80
4.1 Steady-State Equilibrium Allocation of Properties . . . . . . . . . . . . 102
4.2 Allocations of Dwellings and Transactions . . . . . . . . . . . . . . . . 104
4.3 House Price Dynamics with Linear C-Utility . . . . . . . . . . . . . . . 115
4.4 House Price Dynamics with Logarithmic C-Utility . . . . . . . . . . . . 116
∗4.5 The Critical Preference Index m . . . . . . . . . . . . . . . . . . . . . 117
4.6 Age 1 Consumption with Logarithmic C-Utility . . . . . . . . . . . . . 118
4.7 Age 2 with Logarithmic C-Utility . . . . . . . . . . . . . 1196
4.8 Age 3 Consumption with Logarithmic C-Utility for Age 3 Flat Buyers . 120
4.9 Age 4 with Logarithmic C-Utility for Age 3 Flat Buyers . 121Chapter 1
Preface
This thesis consists of three self-contained essays on urban and real estate economics.
Chapter two studies the problem of traffic mode choice within an urban area in a
spatial context. We examine and compare the effects of road capacity reduction and
tolling schemes with respect to the urban traffic distribution and derive their welfare
implications. Chapterthreestudiestheconsequencesoftheselectionproblemlandlords
face in order to attract tenants of appropriate quality. We show that rental prices ex-
hibit an overshooting pattern after exogenous shocks to the cost structure of landlords.
Finally, chapter four generalizes the model of Ortalo-Magn´e and Rady (2006) which
considers the dynamics of house prices in the market for privately owned dwellings
after exogenous income shocks. By using general utility functions, we show how the
effect