housing prices and the savings of renters abstract this paper studies the effects of housing prices on the net worth of young households because prospective homeowners must accumulate down payments a change in housing prices can change their savings patterns theoretically the effect of increases in house prices on savings is ambiguous because households can increase their saving to afford the larger down payment or decrease their saving because they have chosen to delay or forego purchasing a house using data from the 1984 panel study of income dynamics 27 i show that empirically the effect of increased housing prices on saving is positive and quite large relative to the savings of young households young renter households living in cities with high housing prices have more net worth than those living in cities with lowering housing prices controlling for both the income of the households as well as the per capita income of the city in which they live

permanent income hedonic prices and demand for housing new evidence abstract housing demand is examined by looking quite specifically at the income and price variables based on individual household data permanent and transitory incomes are computed through instrumental variables related to human and nonhuman wealth a price is constructed by spatially varying hedonic techniques separation of measured income into permanent and transitory components substantially improves the predictive power of the housing demand estimation and leads to demand elasticities of 1 and 1 with respect to permanent income and price the permanent income elasticity is roughly twice the measured income elasticity

liquidity constraints and housing prices theory and evidence from the va mortgage program abstract this paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value regardless of the overall supply elasticity the existence of price effects implies that the relaxation of liquidity constraints is not pareto improving and may in fact be regressive historical evidence which exploits the fact that a clearly identifiable group war veterans enjoyed the most favored access to mortgage credit after world war ii supports the model the results suggest that more recent mortgage market innovations have served primarily to increase prices rather than home ownership rates and that such innovations have the potential to exacerbate socioeconomic disparities in ownership rates

power illusion in coalitional bargaining an experimental analysis abstract one feature of legislative bargaining in naturally occurring settings is that the distribution of seats or voting weights often does not accurately reflect bargaining power game theoretic predictions about payoffs and coalition formation are insensitive to nominal differences in vote distributions and instead only depend on pivotality we conduct an experimental test of the classical baron ferejohn model with five player groups holding real power constant we compare treatments with differences in nominal power we find that initial effects of nominal differences become small or disappear with experience our results also point to the complexity of the environment as having a negative impact on the speed at which this transition takes place finally and of particular importance as a methodological observation giving subjects a pause accelerates learning

uniqueness of stationary equilibrium payoffs in the baron ferejohn model abstract we consider a multilateral sequential bargaining model in which the players may differ in their probability of being selected as the proposer and the rate at which they discount future payoffs for games in which agreement requires less than unanimous consent we characterize the set of stationary subgame perfect equilibrium payoffs with this characterization we establish the uniqueness of the equilibrium payoffs for the case where the players have the same discount factor we show that the payoff to a player is nondecreasing in his probability of being selected as the proposer for the case where the players have the same probability of being selected as the proposer we show that the payoff to a player is nondecreasing in his discount factor journal of economic literature classification numbers c72 c78 d70

the role and growth of new car leasing theory and evidence abstractthere has been substantial growth in rates of new car leasing over the last few decades building on recent theoretical research we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs but moral hazard limits its use in our model the prevalence of leasing is related to new car reliability which suggests that the recent growth in leasing is at least partly due to improvements in new car reliability we use this model to derive testable implications and then conduct an empirical analysis to investigate whether the operation of the new and used car markets is consistent with the predictions of this theoretical approach our empirical results support the theoretical predictions of our model in particular we provide direct evidence that leasing mitigates adverse selection and that an important factor in the growth in new car leasing rates has indeed been the growth of new car reliability

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

the effect of asymmetric entry costs on bertrand competition abstract by permitting firms to have different entry costs i generalize two previously studied models of two stage entry and pricing amongst bertrand competitors i find that the existing results depend critically on the symmetry assumption for example if firms entry decisions are observed before price setting occurs then total welfare can increase following the introduction of a potential entrant in contrast to the unambiguous welfare reduction found in the symmetric setting if firms entry decisions are unobserved before price setting occurs then the expected price typically decreases or remains unchanged following the introduction of a potential entrant in contrast to the unambiguous price increase found in the symmetric setting in both price setting environments competition increases following the introduction of potential entrants with sufficiently low entry costs a finding that is obscured by focusing on the symmetric models

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

off farm work decisions of husbands and wives joint decision making theoretical and econometric models are developed to examine joint wage labor participation and hours decisions of a husband and wife in farm households the econometric model is multiple equation and recursive the specification of the off farm labor supply equation of the husband wife depends on whether his her wife husband does or does not work off the farm and this structure is endogenous the model is fitted to data for iowa farm households the main conclusion is that the off farm labor supply equation of a married individual differs significantly depending on whether his or her spouse also works for a wage copyright 1989 by mit press

probability and timing of succession or closure in family firms a switching regression analysis of farm households in germany in a two step econometric approach that corrects for selectivity bias we analyse the determinants of the probability of succession and the timing of succession or closure in a unique sample of 233 north german family farms we set up the succession decision as an intertemporal optimization problem the empirical results show that larger and more profitable farms which are specialized in dairy production are significantly more likely to have an intra family successor we find that a nonagricultural education of the current manager or the successor delay succession when the family decided to stop farming operations nonagricultural education of the owner delays closure of the farm closure occurs earlier if the manager is able to lease out the land in the process of retirement although farm households react to incentives originating from tax and pension regulations many important determinants of succession are beyond the control of policymakers

a note on bertrand competition with asymmetric fixed costs abstract we consider a model of bertrand competition with fixed costs of entry or production we show that contrary to most of the existing literature that focuses on symmetric firms and hence symmetric equilibria if we allow these fixed costs to be different for each firm competition may prevent higher cost firms from entering this market even if the differences in cost are small specifically all firms except for the two with the lowest fixed cost find entry blockaded and the two firms with the lowest fixed costs compete ignoring the threat of potential entry

intergenerational transfers borrowing constraints and saving behavior evidence from the housing market abstract we examine the effects of intergenerational transfers on saving behavior by analyzing transfers targeted to first time home purchases transfer recipients have a shorter time to save for a down payment of 9 20 for each dollar of transfer received total savings falls by 29 40 cents and the down payment rises by 61 71 cents transfer recipients increase the value of the home purchased but by an amount that is much lower than possible if the transfer were fully leveraged in addition transfers appear to help households achieve certain down payment thresholds that give favorable mortgage terms

the impact of supply constraints on house prices in england we test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 local planning authorities in england between 1974 and 2008 exploiting exogenous variation from a policy reform vote shares and historical density to identify the endogenous constraints measures we find that regulatory constraints have a substantive positive impact on the house price earnings elasticity the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas and uneven topography has a quantitatively less meaningful impact

estimating endogenous switching regression model with a flexible parametric distribution function application to korean housing demand this study introduces johnson s su normal distribution which can accommodate the flexibility of true error distribution to obtain consistent estimates in an endogenous switching regression model simulation results indicate that the su normal model outperforms the normal model for the consistency of estimators when the error distribution is nonnormal korean housing demand model estimated by the su normal model also outperforms the normal model in terms of parameter estimates and graphical predictions

bargaining foundations of shapley value1 a transferable utility economy in which each agent holds a resource which can be used in combination with the resources of other agents to generate value according to the characteristic function v is studied using a dynamic model of bargaining the main theorem establishes that the payoffs associated with efficient equilibria converge to the agents shapley values as the time between periods of the dynamic game goes to zero in addition it is demonstrated that an efficient equilibrium exists and is unique when an additivity condition is satisfied to demonstrate the sensitivity of the solution to the institutional detail we modify the model to allow for partnerships and show that the shapley value is no longer achieved

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

the power of the proposal maker in a model of endogenous agenda formation in a distributive setting this study examines a voting procedure for which agenda formation is endogenous it is found not surprisingly that agenda formation is another avenue for strategic manipulation of the voting process and provides the member to first take the floor an asymmetric advantage what is surprising is the degree of this advantage we find that the initial proposal maker earns a share of the fixed resource exceeding 1 for an majority rule and this is regardless of the number of members the voting rule is found to be an effective instrument in at least partially offsetting the power of the proposal maker while maintaining the stability of the voting process

neighborhood externality risk and the homeownership status of properties in contrast to corporate and institutional investors single owner occupiers cannot adequately diversify housing investment risk consequently homeownership should be relatively less likely in places with higher housing investment risk using the american housing survey it is documented that neighborhood externality risk a major component of housing investment risk substantially reduces the probability that a housing unit is owner occupied even when controlling for housing type and numerous location and household specific characteristics the effects are quantitatively meaningful and change in change estimates suggest that the effects are causal

credit rationing and the demand for owner occupied housing abstract this study applies cross sectional data to test whether default risk induced credit constraints affect the demand for owner occupied housing credit constrained households are argued to exhibit different elasticities of demand for housing than less constrained households housing demand elasticities are then estimated separately for households obtaining va insured and non va loans the government guarantee on va loans insures lenders against default enabling lenders to apply easier nonprice terms of credit results indicate that observed demand elasticities differ significantly across va and conventional mortgage holders that marginal changes in credit constraints affect housing demand and that fha financing mitigates the effect of mortgage constraints

inequity aversion may increase inequity inequity aversion models have been used to explain equitable payoff divisions in bargaining games i show that inequity aversion can actually increase the asymmetry of payoff division if unanimity is not required this is because responders may be willing to accept a lower share rather than risk being left out inequity aversion may also affect comparative statics the advantage of being the proposer can decrease as players become more impatient game theory usually assumes that players care only about their own material payoffs this hypothesis is clearly refuted by the experimental evidence in the ultimatum and related games see camerer 2003 for a recent survey inequity aversion theories have been developed in order to account for the stylised facts observed in the laboratory see fehr and schmidt 1999 and bolton and ockenfels 2000 inequity aversion means that people are willing to give up some material payoffs in order to achieve more equitable outcomes inequity averse responders prefer to reject small offers in the ultimatum game and the proposers anticipating this make higher offers in this article i examine the implications of inequity aversion for bargaining games in which unanimity is not required e g legislative bargaining games and show that it may lead to a more inequitable outcome than would occur with selfish preferences the leading model of legislative bargaining is due to baron and ferejohn 1989 in this model n symmetric players must divide a budget by simple majority each player has an equal chance of being chosen to propose a division of the budget once a proposal is made the remaining players vote yes or no if a majority of the players supports the proposal it is implemented and the game ends otherwise the procedure is repeated this model predicts that minimal winning coalitions will form and that the proposer will receive a disproportionate share of the proceedings thus the equilibrium of the baron ferejohn model with selfish preferences exhibits a substantial amount of inequity some players are excluded almost half of them if the decision rule is simple majority and the proposer receives a substantial share more than half of the total payoff if the decision rule is simple majority the advantage of the proposer increases as players become more impatient or more risk averse the baron ferejohn model has led to many applications and extensions 1 in its simplest form it assumes that parties are selfish risk neutral and only concerned with their share of cabinet posts as opposed to policy the predictions of the model under these assumptions have been tested by ansolabehere et al 2005 using data on the

bargaining and value we present and analyze a model of noncooperative bargaining among n participants applied to situations describable as games in coalitional form this leads to a unified solution theory for such games that has as special cases the shapley value in the transferable utility tu case the nash bargaining solution in the pure bargaining case and the recently introduced maschler owen consistent value in the general nontransferable utility ntu case moreover we show that any variation in a certain class of our bargaining procedure which generates the shapley value in the tu setup must yield the consistent value in the general ntu setup

tenure choice and the demand for housing this paper deals with the estimation by means of nonlinear methods of preference parameters from observation of behaviour in housing markets it differs from previous work on housing market behaviour in several important aspects first it treats the choice of tenure mode that is whether to rent or own and the housing consumption decision as a joint decision second it explicitly uses the same behavioural model in analysing these discrete and continuous elements of housing market behaviour third it allows for an analysis of the role of capital market imperfections and discriminatory practices in constraining housing market decisions

the contractors game we develop a symmetric information auction model of multiproject contracting with costly bidding and increasing marginal performance costs when there are many potential contractors or only one job there is a zero expected profit symmetric equilibrium in mixed strategies the winning bid at this equilibrium tends to rise perversely with the number of contractors when there are only two potential bidders and either two or three jobs multiple bids of a contractor at equilibrium are negatively correlated with each other the resulting equilibrium outcome tends to divide the market between the contractors in a manner that suggests anticompetitive behavior despite the absence of any collusion

a test of the habit formation hypothesis using household data numerous studies have confirmed the importance of habit formation as represented by a lagged dependent variable in demand analysis although all work to date has been based on aggregate time series data this study uses household level bls interview panel data to test the habit hypothesis an interrelated demand system for seventeen goods is estimated from cross section data and compared with a similar system based on time series data the results show that the habit component is significantly different between the two data sets and much smaller in the cross section data habit effects while not as large in cross section data as time series are still highly significant several explanations are offered concerning why the two sets of estimates differ copyright 1991 by mit press

housing and urban location decisions in spain an econometric analysis with unobserved heterogeneity this paper examines the simultaneous individual choices in spain as regards housing tenure choice and demand and urban location decisions taking into account certain unobserved heterogeneity exhibited by individuals a multinomial mixed logit model is proposed to portray household decisions considering four different options homeownership according to the type of urbanisation of the neighbourhood high level urban property medium inferior level urban property and rural property and renting finally housing demand is estimated controlling for sample selection the results confirm that both housing tenure and urban location in addition to the unobserved heterogeneity of individuals in this context could modify appreciably housing demand estimates for both owners and renters

estimating the consumption and investment demands for housing and their effect on housing tenure status theoretical work suggests that families live in owner occupied housing if their investment demand for housing exceeds their consumption demand for housing using household data from the 1983 survey of consumer finances the authors test this theory by estimating an ordered probit model of whether families rent without owning property rent while owning property other than their home own their home without owning other properties or own their home in addition to other properties for owner occupiers who own additional property both the investment and consumption demands are directly observed enabling the authors to separately identify these functions copyright 1994 by mit press

coalition formation and bargaining protocols a review of the literature this paper offers a review of the vast literature regarding bargaining and coalition formation this topic has been generally described as the attempt to provide strategic foundations to cooperative solution concepts it can therefore be seen as the linking ring between the non cooperative and the cooperative game theoretic approach to coalition formation its central role in economic theory and its relatively long history that goes back to the nash program have fostered a large academic production including surveys nonetheless this paper will focus on an aspect that is often neglected in the dedicated surveys the specificities of the bargaining protocols leading to different outcomes although generally downgraded to the rank of details the differences in bargaining protocols even when minor can cause significant changes in fundamental aspects such as the possibility to reach full cooperation the distribution of final pay offs and the time taken to reach an agreement focused on externalities free games therefore on bargaining protocols sustaining solution concepts for cooperative games in characteristic function form the paper aims at providing a brief but exhaustive review of the topic that could result in a very useful tool for any researcher approaching the subject of coalitional bargaining

a model of housing tenure choice in australia abstract this paper reports the results of an econometric analysis of tenure choice in australia s two largest cities sydney and melbourne particular attention is given to assessing the significance of the user cost of owner occupied housing for tenure decisions using cross sectional data from a 1991 housing survey this study shows that including user costs in the tenure choice model results in a substantial improvement in goodness of fit but also causes the marginal probability for permanent income to become negative it is suggested that this may reflect a tendency for higher income groups in the two cities to live in inner locations where renting is more common because prices are high relative to rents

precaution and liquidity in the demand for housing we exploit cross sectional mortgage data to investigate the importance of liquidity constraints and a precautionary motive in the demand for housing households that are not liquidity constrained consume housing services essentially as the life cycle hypothesis suggests but with a significant precautionary component households that are liquidity constrained in terms of not meeting standard loan to value or payments to income constraints are similar to unconstrained households in most respects including the precautionary motive but they respond somewhat less to fluctuations in their lifetime income suggesting some influence of bank induced liquidity constraints we additionally find however that banks enforce liquidity constraints only weakly jel d91 d12 r21 i introduction the benchmark theory in the economics of consumption is the life cycle or permanent income hypothesis lcpi based on the work of modigliani and brumberg 1954 and friedman 1957 its empirical validity is sometimes questionable especially when compared against alternatives that incorporate liquidity constraints or the precautionary motive for saving see for instance deaton 1992 for a survey rejection of the lcpi may however be just a manifestation of the poor quality of consumption data at the micro level these data are typically subject to the reporting biases and omissions inherent in consumer surveys there are further difficulties in measuring a desired stream of consumption services nondurable consumption goods are a small fraction of total consumption and in the case of food essentials hardly a consumer choice variable durable consumption goods have the feature that they are lumpy and that the consumption services at any point in time are hard to measure we propose to test the lcpi at the micro level with a quite different type of data the data are obtained from the residential mortgage finance database collected by the national association of realtors they are based on actual home purchases and the associated mortgage transactions reported by realtors and thus avoid some of the reporting biases of the consumer surveys more important they allow us to accurately identify households that in principle have instantaneous access to additional liquidity by lowering the down payment for the house purchase or increasing the size of the loan further the purchase of a house provides an accurate measure of a relatively large fraction of consumption services obtained for a medium to long horizon and measured at the time of the consumption decision although our data also have some serious shortcomings they allow a look at the lcpi from an unconventional vantage point perhaps the most influential study employing the standard consumer survey in testing the lcpi at the micro level is that of hall and mishkin 1982 it examines food expenditure from the panel study of income dynamics one of their key results is that consumption tracks income more closely than would be expected under the lcpi they demonstrate that this result could be explained by assuming a group of liquidity constrained consumers consuming their income at each point in time of 20 of the total sample some of the drawbacks of this study are the use of food expenditures to represent consumption the underreporting of income and absence of proper wealth data inherent in the consumer survey and the associated inability to individually separate liquidity constrained consumers from the rest of the sample several previous studies have attempted to improve on this way of testing the lcpi by examining other data sets bernanke 1984 used data on durable consumption goods automobiles to overcome the drawbacks of using food consumption in the hall and mishkin study his results support the lcpi but are still suspect because of possible reporting biases and the lack of good wealth and savings observations

a bargaining model of collective choice we present a general model of legislative bargaining in which the status quo is an arbitrary point in a multidimensional policy space in contrast to other bargaining models the status quo is not assumed to be bad and delay may be pareto efficient we prove existence of stationary equilibria the possibility of equilibrium delay depends on four factors risk aversion of the legislators the dimensionality of the policy space the voting rule and the possibility of transfers across districts if legislators are risk averse if there is more than one policy dimension and if voting is by majority rule for example then delay will almost never occur in one dimension delay is possible if and only if the status quo lies in the core of the voting rule and then it is the only possible outcome this core selection result yields a game theoretic foundation for the well known median voter theorem our comparative statics analysis yield two noteworthy insights i if the status quo is close to the core t hen equilibrium policy outcomes will also be close to the core a moderate status quo produces moderate policy outcomes and ii if legislators are patient then equilibrium proposals will be close to the core legislative patience leads to policy moderation

portfolio choices for homeowners abstract in this paper i show that introducing frictions associated with housing into standard life cycle models can partially resolve the portfolio choice puzzle i calibrate a model in which a representative household endogenously transits from renting to mortgage financed homeownership the household can later adjust housing status either voluntarily or because of a forced move by paying transaction costs it is shown that homeownership crowds out stock market participation risky owner occupied housing substitutes for stocks while bonds provide liquidity young and middle aged households regardless of whether they are currently homeowners hold much less stock than predicted by traditional models without housing

noncooperative foundations of bargaining power in committees and the shapley shubik index abstract in this paper we explore the noncooperative foundations of the bargaining power that a voting rule gives to each member of a committee that bargains in search of consensus over a set of feasible agreements under a voting rule assuming complete information we model a variety of bargaining protocols and investigate their stationary subgame perfect equilibria we show how the shapley shubik index and other power indices can be interpreted as measures of bargaining power that appear in this light as limit cases

a bertrand model of pricing and entry abstract we analyze an oligopolistic pricing and entry model in which there is a sunk cost of entry and in which firms outputs are homogeneous firms pure strategies consist of a binary entry decision and conditional on entry a uniform or non linear price schedule there does not exist a pure strategy nash equilibrium in this model so we analyze the symmetric mixed strategy equilibrium the main result is that if there exists a positive sunk cost of entry then an increase in the number of potential competitors puts more probability weight on higher prices this result is counter to the usual intuition that underlies current antitrust policy

dynamic aspects of consumer decisions in housing markets abstract in this study we estimate a model of the joint tenure length of stay and consumption level choices of families in the housing market this is the first attempt we know of to do this type of estimation the data pertain to a single residence spell per household from the panel study of income dynamics wealthier and better educated families were found to be more mobile in terms of housing consumption after accounting for tenure choice and controlling for planned length of stay renters and owners were found to have similar demand function relationships in terms of the impacts of socioeconomic variables this confirms the notion that renters and owners are not differentiated by housing choice but simply in life cycle circumstances as to when it is optimal to own or rent

an analysis of female labor supply housing demand and the saving rate in japan abstract the paper considers household savings the labor supply of married women and the demand for housing within a unified framework using the cross section data with 8 000 observations we estimate the saving and labor supply functions by the method which takes explicitly into account a change in tenure choice our results show for example that a rise in land price raises the saving rate for those who keep housing purchase plans but lowers it among those who give up the plans we also discuss the implications of these findings for the aggregate saving rate in japan

uniqueness of stationary equilibrium payoffs in coalitional bargaining we study a model of sequential bargaining in which in each period before an agreement is reached the proposer s identity is randomly determined the proposer suggests a division of a pie of size one each other agent either approves or rejects the proposal and the proposal is implemented if the set of approving agents is a winning coalition for the proposer the theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique this generalizes eraslan 34 insofar as a there are no restrictions on the structure of sets of winning coalitions b different proposers may have different sets of winning coalitions c there may be a positive probability that no proposer is selected

measuring the external benefits of homeownership abstract the subsidization of homeownership is justified on efficiency grounds only to the extent that it provides benefits to people other than the homeowner we use the clustered neighborhoods subsample in the american housing survey to measure that benefit in the form of higher housing prices in neighborhoods with higher ownership rates and lower vacancies we attempt to account for unobservable neighborhood and house attributes that may be correlated with occupancy and ownership through instrumental variables switching regressions and panel methods estimates indicate that a housing transition from renting to owning creates approximately 1300 in measured benefits

a model of housing in the presence of adjustment costs a structural interpretation of habit persistence building on the model of sanford j grossman and guy laroque 1990 this paper provides a model of household consumption and portfolio allocation which incorporates the role of housing as both a consumption good and as a component of wealth the model captures the following features of the household s problem a utility depends probably nonseparably on two distinct goods nondurable consumption and housing b nondurable consumption can be adjusted cost lessly but housing is subject to an adjustment cost c households face housing price risk in the sense that the relative price of housing varies over time and d in addition to the house the household can invest in a wide variety of financial assets this single reasonably tractable model generates testable implications for portfolio allocation risk aversion asset pricing and the dynamics of nondurable consumption because the original grossman and laroque model considers a utility function in which the durable good is the sole argument and thus abstracts completely from nondurable consump tion their analysis cannot address either the potential spillover effects of the adjustment costs of the durable good on the dynamics of nondurable consumption or the implications for portfolio allocation of housing risk arising from variation in the relative price of housing in addition to generating implications for issues on which the original grossman and laroque model was silent the housing model delivers a strikingly different message concerning asset pricing that is in contrast to the grossman and laroque result that the consumption based capital asset pricing model consumption capm fails the housing model implies that the consumptioncapm holds we assume that the household incurs an adjustment cost when altering the holding of the dura ble good or house although financial assets can be bought and sold costlessly consumption of the nondurable good can also be adjusted costlessly when choosing a new house the consumer takes into account the fact that the consumption of housing services will be constant at the new level until the subsequent stopping time when it is again worthwhile to incur the adjustment cost thus the home purchase decision is endogenous and fully rational but because of the adjustment cost infrequent in this continuous time setting the household s decision process has a recursive structure at each instant the household first decides whether it is optimal to sell the house immediately on those rare occasions that it is optimal to incur the adjustment cost the household sells the old house and buys a new one instantaneously if the household decides that it is not optimal to sell the house immediately it then determines its optimal holdings of financial assets and optimal level of nondurable consumption conditional on the current housing stock in essence because of the adjustment costs associated with the durable good the current

housing and location choices of retiring households evidence from france in this paper a study is made of the mobility and housing choices of the elderly when retiring using household data collected in france from a theoretical viewpoint individuals are likely to decrease their housing quantity because of an income loss when retiring but they may also increase it to benefit from more housing comfort for leisure using the 1992 trois generations survey it is first shown that housing mobility at retirement is substantial in france with a variety of self reported motives then using the 1994 2001 french europanel survey evidence is found of both upsizing and downsizing for mobile recent retirees in many cases housing adjustments lead to a correction of the initial disequilibrium between the number of rooms and the number of occupants however a significant proportion of mobile recent retirees improve the quality of their dwelling

reinterpreting the kernel the reduced game relevant for the consistency of the prekernel is used to reinterpret this solution concept in a way that makes it independent of interpersonal utility comparisons based on this reinterpretation a non cooperative model is presented that yields in stationary equilibria the prekernel kernel for the class of monotonic transferable utility games next we apply the same non cooperative model to more general coalitional games for pure bargaining problems the model yields the nash solution for general non transferable utility games a natural extension of the prekernel arises thus the prekernel is obtained as the set of payoffs where the relevant bargaining range between every pair of players is split in half journal of economic literatureclassification numbers c71 c72 c78

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

tenure neutral and equitable housing taxation equity and neutrality are distinct concepts in housing taxation and weak and strong tenure neutrality should be distinguished when a tax system is tested for those criteria the taxes paid by landlords must be included as they affect the rents renters pay this paper defines appropriate tests applies them to a stylised tax system and proposes tax changes designed to restore tenure equity and or neutrality it shows how the homeowner s implicit income should be computed for taxes to be fundamentally tenure neutral or equitable or both it also shows the key role played by the cost differential in producing housing services under owner occupation and renting

functional form sample selection and housing demand abstract this paper addresses issues of functional form and sample selection in estimating housing demand urban economic theory suggests that income and price elasticities be allowed to vary with reference incomes and housing prices a generalized box cox estimator rejects linear and log log forms semi log forms are accepted in some cases sample truncation leads to downward biases in permanent income regressions but to slightly upward biased income elasticities price elasticities are generally unchanged

effects of homeownership on household savings abstract causal effects of homeownership decisions on the level and composition of household savings accumulation are estimated genuine positive impacts on both total and nonhousing savings as a function of house value chosen are found the findings suggest however that the homeownership decision in conjunction with choice of an average owner occupied house value does not substantially alter the total amount of accumulated household savings

coalitional bargaining games with random proposers theory and application abstract we consider a non cooperative coalitional bargaining game with random proposers in a general situation for which players differ in recognition probability and time preference we characterize an efficient equilibrium as the generalized nash bargaining solution that belongs to the core the model is applied to wage bargaining between an employer and multiple workers although involuntary unemployment may occur in equilibrium full employment emerges as players become sufficiently patient

buying a home with a resale value location location location we develop a dynamic multiregion model where a household s choice of housing location depends on its current wealth and its current type and involves both consumption and investment considerations the relative strength of the consumption motive and the investment motive determines the equilibrium pattern of residential sorting a strong investment consumption motive implies sorting according to household type wealth the model predicts that large house price fluctuations are associated with a low degree of sorting by type this prediction is consistent with evidence from us metropolitan areas when income education and age are used as proxies for household type

voting and vetoing the consequences of veto power in committees is analyzed using the appro ach of noncooperative bargaining theory it is first shown that in equilibrium nonveto players do not share in the benefits gained by the decision making of the committee that is in every equilibrium outcome of the bargaining game nonveto players earn zero some measures for reducing the excessive power of veto members in committees are analyzed specifically i study the effects of imposing a deadline on negotiations and of expanding the committee by increasing the number of nonveto players quantitative results are given for the case of the un security council

computation of equilibrium values in the baron and ferejohn bargaining model abstract computation of exact equilibrium values for n player divide the dollar legislative bargaining games as in baron and ferejohn 1989 with general quota voting rules recognition probabilities and discount factors can be achieved by solving at most n bivariate square linear systems of equations the approach recovers eraslan s 2002 uniqueness result and relies on a characterization of equilibria in terms of two variables that satisfy a pair of piecewise linear equations

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

labor income uncertainty skewness and homeownership a panel data study for germany and spain abstract in this paper we empirically investigate the effect of labor income uncertainty on the probability of homeownership in germany and spain this study is motivated by two facts firstly theoretical models tend to provide ambiguous results on this issue secondly previous empirical evidence focuses exclusively on the us housing market to carry out our analysis we propose more precise income uncertainty measures based on panel data labor income equations we observe that households facing high levels of income uncertainty display a preference for renting while those located in more positively skewed income distributions show a greater propensity for homeownership

noncooperative foundations of the nucleolus in majority games abstract this paper studies coalition formation payoff division and expected payoffs in a divide the dollar by majority rule game with random proposers a power index is called self confirming if it can be obtained as an equilibrium of the game using the index itself as probability vector unlike the shapley value and other commonly used power indices the nucleolus has this property the proof uses a weak version of kohlberg s siam j appl math 20 1971 62 balancedness result reinterpreting the balancing weights as probabilities in a mixed strategy equilibrium

profits from participation in high value agriculture evidence of heterogeneous benefits in contract farming schemes in southern india abstract this paper assesses the variable impact of participation in high value agriculture through contract farming arrangements in southern india using survey data for 474 farmers in four commodity sectors gherkins papaya marigold and broiler an endogenous switching model is used to estimate net profits from participation findings suggest that average treatments effect vary widely across contract commodities papaya and broiler contracting offer clear net gains for participants whereas marigold contracting leaves participants worse off for gherkins while contracting holds net gains for participating farmers overall this is true of contracts with some firms but not others the standard deviations of point estimates of treatment effects are quite large indicating variability in profit gains even within the same commodity sectors thus notwithstanding the sign of average treatment effects contract farming arrangements have diverse impacts on income for individual farmers and these could have implications for sustained participation of farmers in high value agriculture

effects of income variability on the demand for owner occupied housing abstract this study investigates whether the uncertainty associated with an income stream affects the demand for owner occupied housing theoretical models yield an ambiguous sign for the direction of change in consumption but our empirical findings are consistent with the hypothesis that the consumption of housing falls when the uncertainty of receipt of income increases specifically in a sample of military employees the income earned by wives had little or no effect on the demand for housing we also find evidence that suggests the demand for housing is affected by pension rights the closer to retirement the stronger the effect

noncooperative foundations of stable sets in voting games abstract this short note studies the noncooperative foundations of von neumann morgenstern stable sets in voting games to do so we study stationary markov equilibria smes of a noncooperative legislative bargaining game based on underlying simple games the following result emerges from such an exercise every stable set of the underlying simple game is the limit set of pure strategy stage undominated smes of the bargaining game when voters are sufficiently farsighted

sequential legislative lobbying under political certainty in this paper we analyse the equilibrium of a sequential game theoretical model of lobbying based on groseclose and snyder 1996 describing a legislature that votes on two alternatives and two opposing lobbies lobby 0 and lobby 1 that compete by bidding for legislators votes in this model there is a strong second mover advantage

on market games when agents cannot be in two places at once abstract we consider markets in which agents supply their time or the services of a capital good and the duration of the market is limited we show that a coalitional game can be generated by such a market if and only if the characteristic function of the game is superadditive journal of economic literature classification numbers c71 d51

a dynamic model of bertrand competition with entry abstract this paper analyzes a simple repeated game of simultaneous entry and pricing we report a surprising property of the symmetric equilibrium solution if the number of potential competitors is increased above two the market breaks down with higher probability and the competitive outcome becomes less likely more potential competition lowers welfare another bertrand paradox the model can also be applied to auctions to explore whether a revenue maximizing auctioneer should restrict the number of bidders if bidder participation is costly

general trends in financing social housing in spain the affordability of houses has become one of the main problems for spanish families in recent decades the government has been actively involved in designing policies to solve this problem theoretically the characteristics of the housing stock and population always determine the type of public intervention in the spanish case there are some features that give rise to a particular approach which is slightly different from that of the rest of europe the following elements among other things have been taken into account when designing housing policies in spain the cultural importance of home ownership the evolution of prices the distinct condition of large cities such as barcelona and madrid the high proportion of mortgage burdens in relation to family income and the role played by the several levels of government in present spanish housing policy it is possible to identify at least two main trends both the 1992 95 scheme and the 1996 99 scheme seek to provide financial support basically to t

the nucleolus of large majority games members of a shareholder meeting or legislative committee have greater or smaller voting power than meets the eye if the nucleolus of the induced majority game differs from the voting weight distribution we establish a new sufficient condition for the weight and power distributions to be equal and we characterize the limit behavior of the nucleolus in case all relative weights become small

the transition to home ownership and the black white wealth gap this paper analyzes differences in the likelihood that black and white families become homeowners by following a sample of black and white renters over time we are able to separately study racial differences in the likelihood of applying for a mortgage and in the likelihood that a mortgage application is accepted although its effect on the race gap in housing transitions is small we find strong evidence that black applicants are almost twice as likely as comparable white households to be rejected even when credit history proxies and measures of household wealth are accounted for we show that the housing transition gap exists primarily because blacks are less likely to apply for mortgages in the first place the analysis suggests that differences in income family structure and in the ability and willingness of parents to provide down payment assistance are the primary reasons for this applications gap we speculate that the portion of the gap that remains unexplained after controlling for income d

the impact of mortgage interest rate subsidies on household borrowing abstract the responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving we estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium and low income households the reform established a ceiling in the price of the house that could be financed with the program first we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high price areas and estimate that the elasticity of the probability getting a loan to the interest rate lies between 2 8 and 1 3 second we document that after the reform the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals both findings are consistent with a negative response of household borrowing to increases in interest rates

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

demand bargaining and proportional payoffs in majority games abstract we study a majoritarian bargaining model in which players make payoff demands in decreasing order of voting weight the unique subgame perfect equilibrium outcome is such that the minimal winning coalition of the players that move first forms with payoffs proportional to the voting weights this result advances previous analysis in terms of one or more of the following a the simplicity of the extensive form finite horizon with a predetermined order of moves b the range of the majority games covered c the equilibrium concept subgame perfect equilibrium is sufficient for a unique prediction

negotiation in legislatures over government formation we question results claiming to extend non cooperative models of legislative bargaining to the theoretically general and substantively typical case with an arbitrary number of disciplined parties we identify problems with both the derivation of formal results and empirical evaluation of these no empirically robust formateur advantage is observed in field data on bargaining over government formation given this theoretical and empirical impasse we reconsider the substantive premises that should form the foundation for any new attempt to model this fundamental political process arguing that models should be grounded in binding constitutional constraints on the government formation process in parliamentary democracies

instrument choice the demand for mortgages in canada abstract this paper is directed at understanding the factors which caused mortgage demand to fluctuate to the degree witnessed in the 1980s we model the mortgage choice decision as involving simultaneous options on both the term and the amortization choice by cost minimizing risk averse borrowers the model is estimated using a bivariate ordered probit methodology an extensive database containing details on the financial and demographic characteristics of households is used we find that contrary to the dominant model of mortgage demand borrowers react to market conditions in a risk averse and cost minimizing manner

behavioral identification in coalitional bargaining an experimental analysis of demand bargaining and alternating offers alternating offer and demand bargaining models of legislative bargaining make very different predictions in terms of both ex ante and ex post distribution of payoffs as well as in the role of the order of play the experiment shows that actual bargaining behavior is not as sensitive to the different bargaining rules as the theoretical point predictions whereas the comparative statics are in line with both models we compare our results to studies that attempt to distinguish between these two approaches using field data finding strong similarities between the laboratory and field data regardless of the underlying bargaining process

upgrades switching costs and the leverage theory of tying this article investigates the role of product upgrades and consumer switching costs in the tying of complementary products previous analyses have found that a monopolist of one product will not increase its profits and reduce social welfare by tying and leveraging its monopoly position into a complementary market if the initial monopolised product is essential where essential means that all uses of the complementary good require the initial monopolised product we show that this is not true in settings characterised by product upgrades and consumer switching costs we also discuss various extensions including the role of the reversibility of tying

life cycle and housing decisions a comparison by age cohorts the use of decomposition methodologies when the involved variable is continuous is not common in the literature this article uses this methodology together with other decomposition methodologies to explain how age can influence on housing decisions in particular we use spanish data to study whether the age of the householder plays a significant role in influencing household decisions with respect to housing tenure and demand from the comparison of housing decisions between different groups of households classified by the age of the householders we conclude that age plays the primary role in explaining the gap between households regarding tenure choice while it shares its importance with other covariates of the model in the housing demand decision

bertrand competition under uncertainty we look at a bertrand model in which each firm may be inactive with a known probability so the number of active firms is uncertain the model has a mixed strategy equilibrium in which industry profits are positive and decline with the number of firms the same features which make the cournot model attractive unlike those in a cournot model with similar uncertainty bertrand profits always increase in the probability that firms are inactive profits decline more sharply than in the cournot model the pattern found empirically in bresnahan and reiss 1991

a noncooperative coalitional bargaining game with random proposers abstract we extend the stahl rubinstein s alternating offer model ton person coalitional bargaining the key feature of the model is the random selection of proposers at every round no delay of agreement occurs in equilibrium for a super additive game in contrast to the fixed order model of chatterjeeet al rev econ stud 60 1993 463 477 when the discount factor of future payoffs is sufficiently high the agreement on the grand coalition is reached if and only if it has the largest value per capita among all coalitions moreover in the limit as the discount factor goes to one all players divide equally the value of the grand coalition regardless of who makes a proposal journal of economic literatureclassification numbers c72 c73 c78

the effect of borrowing constraints on consumer liabilities this paper explores the effects of liquidity constraints on consumer liabilities while much empirical evidence attests to the importance of liquidity constraints in the u s economy evidence about the effects of borrowing constraints on consumer balance sheets is scarce using the 1983 survey of consumer finances data we estimate desired borrowing for unconstrained households we then evaluate the gap between predicted and observed debt for the sample of liquidity constrained consumers predicted debt is 75 percent higher than actual debt in the liquidity constrained sample thus the effect of removing borrowing constraints has quantitatively important implications for the allocation of debt in the household portfolio the removal of borrowing constraints would raise aggregate household liabilities by 9 percent copyright 1993 by ohio state university press

the effects of price risk on housing demand empirical evidence from u s markets this article examines how price risk affects housing demand it identifies two relevant channels a financial risk effect that reduces demand and a hedging effect that increases demand since current homes may hedge future housing costs the latter dominates when hedging incentives are strong namely when the likelihood of moving up the housing ladder is high and the tendency to move across markets is low for households with weak hedging incentives the article finds negative effects of price risk on the timing and size of home purchases but positive effects for households with strong hedging incentives

housing purchases and transitory income a study with panel data in this paper we explore the role of transitory income in the housing purchase decision because of moral hazard considerations banks typically require downpayments to be financed internally hence transitory income is potentially important in overcoming the downpayment constraint using a novel approach to the measurement of permanent and transitory income we estimate a two stage model in which households decide whether to purchase housing in the first stage and the quantity to be purchased in the second the results indicate a significant role for transitory income in both decision stages

the demand for housing in spain an endogenous switching regression analysis housing demand in spain has been studied by using data disaggregated into primary and secondary housing demands it is found that demand for both types of housing area indeed related and that they are both considered necessities thus suggesting that their consumption ought to be modelled as a joint decision moreover it is found that traditional determinants of housing demand affect primary and secondary home demands differently these differences are attributable to the following economic rationales need for asset holdings diversifications relative high cost of home ownership versus rental in choice locations and differences in land demand intensity across regions in sum the findings suggest that policy makers in spain contrary to popular beliefs must consider secondary homes an integral part of households accommodation need

value consistency and random coalition formation abstract given an n player cooperative game and a feasible age n vector suppose that the players in a cooperative game are randomly split into two coalitions each with a randomly chosen leader the two leaders bargain bilaterally and each pays out of his share a wage to each member of his coalition as specified by the wage vector the wage vector is said to be consistent with the above procedure if it is equal to the ex ante expected payoff vector we prove that if all 2 coalition partitions are equally likely and if the bilateral bargain splits the surplus equally then the unique consistent payoff vector is the shapley value an equivalent consistency result holds for partitions with more than two elements these results are related to gul s 1989 result on noncooperative implementation of the shapley value journal of economic literature classification number 026