A multi-agent model of urban processes: Modelling relocation processes and price setting in housing markets

This paper introduces an agent-based micro-simulation model of housing market processes. The model describes aggregate housing market developments, such as price and turnover, as the outcome of households’ decisions to search for a new dwelling, accept an offered dwelling or sell their dwelling. An important feature of the model is that households’ decisions are based on perceptions of housing market probabilities. Households update these perceptions based on observed bargaining outcomes in the market. The model was tested in a simulation experiment and appeared to respond plausibly to different market settings in terms of prices and households’ perception of the market.

Research highlights
► An agent-based micro-simulation model of housing market processes is developed
► Buying and selling decisions are based on perceived market conditions
► Beliefs about the market are updated using Bayesian inference
► Simulations confirm flexibility and richness of the approach.